from the District Court of Billings County, Southwest
Judicial District, the Honorable Dann E. Greenwood, Judge.
T. Campbell (argued), Minneapolis, Minnesota, and Robin W.
Forward (on brief), Bismarck, North Dakota, for plaintiff and
J. Smith (argued) and Tyler J. Malm (on brief), Bismarck,
North Dakota, for defendant and appellant.
1] Counce Energy BC #1, LLC, appeals from a judgment entered
on a jury verdict awarding Continental Resources, Inc., $153,
666.50 plus costs and disbursements for breaching its
contract with Continental by failing to pay its share of
expenses to drill an oil and gas well, and dismissing with
prejudice Counce's counterclaims. Because the district
court lacked subject matter jurisdiction over
Continental's breach of contract action and Counce's
counterclaims, we vacate the judgment.
2] In December 2011, the Industrial Commission issued a
pooling order for a spacing unit in Billings County. Counce,
a non-operating working interest owner, elected to
participate in Continental's drilling of the oil and gas
well. See generally Gadeco, LLC v. Indus.
Comm'n, 2012 ND 33, ¶¶ 4-7, 812 N.W.2d 405
(background discussion of participating interest owners,
nonparticipating interest owners, and risk penalties). By
electing to participate, Counce agreed to pay its
proportionate share of Continental's "reasonable
actual cost" for drilling the Billings County well, plus
a reasonable charge for supervision. N.D.C.C. §
38-08-08(2). Once work began, Continental sent monthly
billing packets which included the invoices for drilling
expenses and expenditure details. As of May 2012, Counce paid
all of the billing statements it had received from
Continental, but the amounts Counce paid had exceeded its
share of the estimated total costs listed in the AFE
(authority for expenditure) in the invitation to participate.
In June 2012, Counce stopped paying for its billed share of
the drilling costs.
3] In May 2013, Continental filed an oil and gas production
lien under N.D.C.C. § 38-08-10 against Counce's
share of the well's production, claiming it was owed
$180, 419.12 for unpaid expenses of operating the well. In
September 2013, Continental sued Counce to foreclose the
lien. Counce answered and counterclaimed, alleging in part
that the overages charged to it "do not reflect the
reasonable actual costs of drilling and operating" the
well. While the lien foreclosure action was pending,
Continental conducted a regular internal audit of the well
and discovered some of its invoices were incorrectly charged
to the well. Continental corrected the error and credited
Counce $23, 573.23. Continental also released its lien, paid
all withheld production revenue to Counce, and dropped the
4] In March 2014, Continental amended its complaint against
Counce to recover $160, 089.02 based on theories of breach of
contract, account stated, and unjust enrichment. Counce again
raised its defenses and counterclaims, alleging unjust
enrichment, fraud, breach of fiduciary duty, and abuse of
process. In a series of pretrial rulings, the district court
determined it had subject matter jurisdiction over
Continental's lawsuit, but did not have subject matter
jurisdiction over Counce's "reasonable actual
cost" claim because that issue was within the Industrial
Commission's exclusive jurisdiction under N.D.C.C. §
38-08-08(2) and Counce had failed to exhaust its
administrative remedies. The court dismissed the
"reasonable actual cost" claim "with
prejudice" and ordered that Counce could not argue the
reasonableness of Continental's costs for drilling and
operating the well during the trial. The court also granted
partial summary judgment dismissing Counce's fraud and
breach of fiduciary duty counterclaims, and dismissing both
parties' unjust enrichment claims. Following a trial, the
jury found that Continental had not committed abuse of
process against Counce, but that Counce had breached its
contract with Continental by failing to pay its proportionate
share to drill and operate the well. The jury awarded
Continental $153, 666.50.
5] The dispositive issue on appeal is whether the district
court had subject matter jurisdiction over this lawsuit.
6] To issue a valid order or judgment, a court must have both
subject matter and personal jurisdiction. See
Interest of M.W., 2010 ND 135, ¶ 5, 785 N.W.2d 211;
Albrecht v. Metro Area Ambulance, 1998 ND 132,
¶ 10, 580 N.W.2d 583. Issues involving subject matter
jurisdiction cannot be waived and can be raised by the
parties or the court at any time. See Trottier v.
Bird, 2001 ND 177, ¶ 5, 635 N.W.2d 157; Earnest v.
Garcia, 1999 ND 196, ¶ 7, 601 N.W.2d 260. Subject
matter jurisdiction is the court's legal authority to
hear and determine the general subject involved in an action.
See Garaas v. Cass Cty. Joint Water Res. Dist., 2016
ND 148, ¶ 4, 883 N.W.2d 436; Trottier, at
¶ 6. Dismissal for lack of subject matter jurisdiction
is generally appropriate if the plaintiff fails to exhaust
administrative remedies, because failure to exhaust those
remedies precludes making a claim in court. See GEM
Razorback, LLC v. Zenergy, Inc., 2017 ND 33, ¶¶
8-9, 890 N.W.2d 544; Vogel v. Marathon Oil Co., 2016
ND 104, ¶ 7, 879 N.W.2d 471. We review decisions on
subject matter jurisdiction de novo when the
jurisdictional facts are undisputed. See Zerr v.
N.D. Workforce Safety & Ins., 2017 ND 175, ¶ 10, 898
N.W.2d 700; Lavallie v. Lavallie, 2015 ND 69, ¶
7, 861 N.W.2d 164.
7] We have repeatedly emphasized that, under N.D.C.C. ch.
38-08, the Legislature granted the Industrial Commission
broad authority to regulate oil and gas development. See,
e.g., Black Hills Trucking, Inc. v. N.D. Indus.
Comm'n, 2017 ND 284, ¶ 12; Langved v.
Cont'l Res., Inc., 2017 ND 179, ¶ 12, 899
N.W.2d 267; Envtl. Driven Solutions, LLC v. Dunn
Cty., 2017 ND 45, ¶ 9, 890 N.W.2d 841');">890 N.W.2d 841; GEM
Razorback, 2017 ND 33, ¶ 10, 890 N.W.2d 544. When
the Commission issues a pooling order, N.D.C.C. §
38-08-08(2) directs in part:
Each such pooling order must make provision for the drilling
and operation of a well on the spacing unit, and for the
payment of the reasonable actual cost thereof by the owners
of interests in the spacing unit, plus a reasonable charge
for supervision. In the event of any dispute ...