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Northern Oil & Gas, Inc. v. Eog Resources, Inc.

United States District Court, D. North Dakota

April 17, 2018

Northern Oil & Gas, Inc., Plaintiff,
v.
EOG Resources, Inc., Defendant.

          ORDER DENYING DEFENDANT'S MOTIONS TO DISMISS

          Daniel L. Hovland, United States District Court Chief Judge

         Before the Court is EOG Resources, Inc.'s (“EOG”) Motion to Dismiss for Failure to Add Indispensable Parties, or Alternatively, for an Order Requiring the Plaintiff to Add the Required Parties filed on June 21, 2017. See Docket No. 13. Northern Oil & Gas, Inc. (“Northern Oil”) filed a response on July 19, 2017. See Docket No. 20. EOG filed a reply to Northern Oil's response on August 7, 2017. See Docket No. 29. Also before the Court is EOG's Motion to Dismiss Because Claim Preclusion Bars Northern Oil's Claims filed on July 10, 2017. See Docket No. 15. Northern Oil filed a response on July 31, 2017. See Docket No. 28. EOG filed a reply to Northern Oil's response on August 7, 2017. See Docket No. 32. For the reasons set forth below, the Court denies both of EOG's motions to dismiss.

         I. BACKGROUND

         Northern Oil is a Minnesota Corporation with its principal office in Minnesota. EOG is a Delaware corporation with its principal office in Texas. See Docket No. 1, p. 1. Northern Oil brought this diversity action against EOG in an attempt to quiet title to a mineral leasehold interest. See Docket No. 1, p. 19. Northern Oil also requests the Court declare EOG acted wrongfully when it made certain deductions from revenue payments it owed Northern Oil, and Northern Oil asks the Court to bar EOG from engaging in such conduct in the future. See Docket No. 1, p. 22.

         A. THE CONVEYANCES

         The conveyances at issue have been the subject of litigation before North Dakota state courts. See Johnson v. Finkle, 837 N.W.2d 123 (N.D. 2013). The deed at the center of the controversy presents a classic Duhig[1] scenario-a grant and a reservation, both of which cannot be satisfied because the grantor does not own enough minerals. Axel Anderson owned the surface and minerals in the following property located in Mountrail County, North Dakota:

Township 157 North, Range 91 West of the 5th Principal Meridian
Section 7: E1/2SE1/4
Section 8: NW1/4
Township 158 North, Range 91 West of the 5th Principal Meridian
Section 23: All
Section 24: All
Section 25: W1/2, NE1/4, N1/2SE1/4
Section 26: N1/2NE1/4, SE1/4NE1/4

See Docket No. 1, p. 2. In 1949, Anderson sold half of the minerals in the above-described property to L.S. Youngblood, except for the S1/2NE1/4 and the N1/2SE1/4 of Section 25, Township 158 North, Range 91 West, which he reserved to himself. See Docket No. 24-1. In 1957, Axel Anderson and his wife Norma Anderson entered into a contract for deed (“the Contract for Deed”) to sell the property located in Township 158 North, Range 91 West to Henry Johnson; the Contract for Deed contained a provision stating “[t]he grantor reserves a 1/4 mineral interest . . . .” See Docket No. 24-2. On October 4, 1962, the Andersons conveyed the property described in the Contract for Deed to Johnson by warranty deed (“the Warranty Deed”). See Docket No. 1, p. 11. The Warranty Deed contained a provision that stated: “The grantor reserves a 1/4 mineral interest, including gas and oil, with the right of ingress and egress for the purposeof [sic] mining, exploring or drilling for the same.” See Docket No. 24-3. Nancy Finkle has succeeded to the Anderson's interests. See Docket No. 1, p. 11. Henry Johnson's interest has been divided among his successors (“the Johnsons”). See Docket No. 1, pp. 11-12. By various oil and gas leases and assignments, Northern Oil acquired 90% of a mineral leasehold interest carved from Finkle's mineral estate; EOG acquired 100% of a mineral leasehold interest carved from the Johnson's mineral estate. See Docket No. 1, p. 12.

         B. THE STATE COURT ACTION

         The Johnsons brought suit against Finkle in the Northwest Judicial District Court of North Dakota to determine ownership of the 1/2 mineral interest that remained with the Andersons after the conveyance to Youngblood. Finkle, 837 N.W.2d at 134. Finkle brought a counterclaim alleging the Warranty Deed contains a mistake and seeking reformation. Id. Although both Northern Oil and EOG's leasehold interests were of record, neither was named a party to the lawsuit. See Docket No. 1, p. 13. After reviewing various mineral leases and a 1957 delay rental stipulation, the state district court concluded reformation was unwarranted, explaining: “The fact that the Anderson family continued to convey minerals in which they no longer had an ownership interest does not establish a mutual mistake was made when the warranty deed was executed.” See Docket No. 24-14, p. 14. The state district court applied the Duhig rule to the Warranty Deed and quieted title in the minerals to the Johnsons. See Docket No. 24-14, pp. 7-8 and 15. Finkle appealed and the North Dakota Supreme Court affirmed. See Finkle, at 133. Finkle then petitioned for a rehearing asserting the North Dakota Supreme Court overlooked her argument regarding the effect of the 1957 delay rental stipulation. Id. at 137. The court denied her petition, stating it “considered Finkle's argument about the delay rental stipulation but it did not change the outcome or affect the analysis.” Id. at 138.

         C. THE ...


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