United States District Court, D. North Dakota
Pitchblack Oil, LLC, Dustin J. Stuber and Suzanne M. Young, Trustees of the Good Shepherds Royalty Trust, Douglas R. Hansen, and Lori A. Hansen, Plaintiffs,
Hess Bakken Investments II, LLC, Hess Corporation, Rocky R. Svihl, as Trustee of the RGKH Mineral & Royalty Trust dated November 1, 1995, and Whitetail Wave LLC, Defendants.
ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY
JUDGMENT AND GRANTING DEFENDANTS' MOTION FOR SUMMARY
Hovland, Chief Judge United States District Court
the Court are cross-motions for summary judgment. Pitchblack
Oil, LLC (“Pitchblack”) filed a complaint against
Hess Bakken Investments II and Hess Corporation
(“Hess”) in North Dakota state court on September
8, 2016. See Docket Nos. 1-3 and 1-5. Hess filed a
Notice of Removal based on diversity jurisdiction on
September 30, 2016. See Docket No. 1. Pitchblack and
Hess entered into a Stipulation to Amend Complaint to add
additional parties on October 6, 2016. See Docket
No. 8. The Plaintiffs filed an amended complaint on December
21, 2016. See Docket No. 17. Hess filed a
counterclaim against the Plaintiffs and a crossclaim against
Whitetail Wave LLC (“Whitetail”), and Rocky R.
Svihl on January 12, 2017. See Docket No. 19. The
Plaintiffs moved for summary judgment on April 19, 2017.
See Docket No. 34. Whitetail filed a response
supporting the Plaintiffs' summary judgment motion on May
15, 2017. See Docket No. 40. Hess filed a
cross-motion for summary judgment on May 25, 2017.
See Docket No. 41. The Plaintiffs filed a reply to
Hess's summary judgment motion on June 15, 2017.
See Docket No. 52. Whitetail filed a response in
opposition to Hess's summary judgment motion on June 29,
2017. See Docket No. 53. Hess filed a reply to the
Plaintiffs' reply and Whitetails' response on July
13, 2017. See Docket No. 54. For the reasons set
forth below, the Plaintiffs' summary judgment motion is
denied and Hess's summary judgment motion is granted.
is a North Dakota LLC. Dustin Stuber, a citizen of North
Dakota, is Pitchblack's sole member. Hess is a Delaware
corporation with its principal office in New York. Pitchblack
brought suit against Hess in North Dakota state court, and
Hess filed a notice of removal based on diversity
jurisdiction. At the time the case was removed to this Court,
complete diversity existed among the litigants. Pitchblack
then amended its complaint to add additional parties. The
amended complaint added the following plaintiffs: Dustin J.
Stuber and Suzanne M. Young, both citizens of North Dakota;
Douglas R. Hansen, a citizen of Arizona; and Lori A. Hansen,
a citizen of Montana. It also added the following defendants:
Rocky R. Svihl, a citizen of Arizona; and Whitetail Wave,
LLC, a Montana LLC. Whitetail's sole member is Lonney H.
White, Jr., a citizen of Montana. The amended complaint
procedurally eliminated diversity of citizenship between the
parties because it includes both plaintiffs and defendants
from Montana and Arizona. Factually however, as discussed
below, the interests of Defendants Svihl and Whitetail align
with the Plaintiffs' interests. Collective references to
“Plaintiffs” hereafter will include the
procedural plaintiffs as well as Defendants Svihl and
facts of the case are undisputed. Between October and
December of 2005, Rocky Mountain Exploration, Inc.
(“RME”) acquired a number of oil and gas leases
over lands in Dunn County, North Dakota. The pleadings and
briefs set forth the details of these leases; the parties
refer to them as the “Subject Leases.”
See Docket Nos. 17, 35, and 43-2. On May 15, 2006,
RME executed an Assignment of Overriding Royalty Interests
(“the Assignment”) assigning various overriding
royalty interests in the Subject Leases to the “Stuber
Group.” The Plaintiffs are members of the Stuber Group
or successors in interest. See Docket No. 35, p. 2.
The overriding royalty interests assigned to the Stuber Group
ranged from 1.83% to 4.00%. The Assignment contained language
stating it applied to the Subject Leases “or any
extensions or renewals thereof entered into within 180 days
of expiration of the applicable [Subject] Lease.”
See Docket No. 7-1, p. 1.
parties acquired various top leases (“the Top
Leases”) over the Subject Leases. See Docket
No. 17, pgs. 10-15. Most of these third parties had a
leasehold interest in the Subject Leases when they acquired
the Top Leases. See Docket No. 35, p. 11. The third
parties generally held only a partial interest in the Subject
Leases, but obtained a 100% interest in the corresponding Top
Lease. See Docket No. 43-2, pgs. 11-22. Each Top
Lease differed in some respect from its corresponding Subject
Lease; all of the Top Leases contained royalty amounts and
primary term lengths that differed from the Subject Leases,
and each was acquired with new bonus consideration.
See Docket No. 43-2, pgs. 11-22. Some of the tracts
covered by the Subject Leases remain in production and
continue to be burdened by the Subject Leases. The Subject
Leases expired as to other tracts-the tracts at the heart of
this dispute-and the Top Leases became effective.
See Docket No. 43-2, p. 4. Through a series of
conveyances and acquisitions, Hess acquired nearly all of the
working interests in both the Subject Leases and the Top
Leases. See Docket No. 36, p. 5.
Plaintiffs demand Hess acknowledge the overriding royalty
interests assigned by BME to the Stuber Group. Hess
recognizes the Plaintiffs have an interest in royalties from
production on lands still held by the Subject Leases.
See Docket No. 43-2, pgs. 2-3. But Hess disputes the
Plaintiffs' assertion that the Stuber Group overriding
royalty interests applies to the Top Leases. Pitchblack,
Dustin J. Stuber, Suzanne M. Young, Douglas R. Hansen, and
Lori A. Hansen (together “Pitchblack”) filed a
joint motion for summary judgment. Whitetail filed a brief in
support of the joint motion. Hess then filed a counter-motion
for summary judgment.
parties disagree on whether the Top Leases are considered
renewals or extensions of the Subject Leases. The Assignment
states it applies to any “extensions” or
“renewals” that are “entered into within
180 days of expiration of the applicable lease.” If the
Top Leases are renewals or extensions, they are burdened by
the Stuber Group overriding royalty. If the Top Leases are
not renewals or extensions, they are unburdened by the Stuber
Group overriding royalty. The Court concludes the Top Leases
are not renewals or extensions, but it first addresses the
jurisdictional issue raised by the procedural background of
exists under 29 U.S.C. § 1332(a)(1) when the
amount-in-controversy exceeds $75, 000 dollars and the
parties are citizens of different states. In this case, the
amount-in-controversy requirement is satisfied, but some
plaintiffs and defendants are citizens of the same state.
However, it is not the case's caption that controls
diversity determinations; the court is required to
“look beyond the pleading and to arrange the parties
according to their side of the dispute.” City of
Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 69
(1941). This Court has had occasion to discuss City of
Indianapolis, a seminal case on the issue:
In City of Indianapolis, a New York bank was the
trustee under a mortgage deed to secure bonds issued by a gas
company. The bank filed suit in federal district court
against the gas company and the City of Indianapolis, seeking
a declaration that a lease was valid and binding on the gas
company and the City of Indianapolis, and a judgment for
overdue interest on the bonds. Only one issue remained in
litigation, namely, whether the lease was valid and binding
on the City of Indianapolis. Both the bank and the gas
company asserted that the lease was valid and, therefore,
they were “partners in litigation.” Id.
at 75. The Supreme Court specifically found that both the
bank and the gas company desired the same outcome in
litigation, for the lease to be upheld:
The property covered by the lease is now in the City's
possession; [the bank] is simply acting to protect the
bondholders' security. As to [the gas company], if the
lease is upheld, it will continue to receive a six per cent
return on its capital, and the burden of paying the interest
on its bonded indebtedness will be not upon it but upon the
City. What [the bank] wants [the gas company] wants and the
City does not want. Yet the City and [the gas company] were
made to have a common interest against [the bank] when, as a
matter of fact, the interests of the City and of [the gas
company] are opposed to one another. Therefore, if regard be
had to the requirements of jurisdictional integrity, [the gas
company] and [the bank] are on the same side of the
controversy not only for their own purposes but also for
purposes of diversity jurisdiction. But such realignment
places Indiana ‘citizens' on both sides of the
litigation and precludes assumption of jurisdiction based
upon diversity of citizenship. We are thus compelled to the
conclusion that the District Court was without jurisdiction.
Id. at 74-75. As a result, the Supreme Court
realigned the gas company as a party plaintiff and the case
was dismissed for lack of ...