United States District Court, D. North Dakota
Power Energy Corporation, a North Dakota Corporation; Altschuld Oil, L.L.C., a Colorado Limited Liability Company; Copperhead Corporation, a North Dakota Corporation; Strata Resources, Inc., a Colorado Corporation; Michael S. Johnson, a Colorado Resident; Michael T. Fitzmaurice, a North Dakota Resident; Patrick L. Butz, a North Dakota Resident; and Jacques F. Butz, a North Dakota Resident, Plaintiffs,
Hess Bakken Investment II, L.L.C., a Delaware Limited Liability Company, Defendant.
ORDER DENYING MOTION TO DISMISS
CHARLES S. MILLER, JR. UNITED STATES MAGISTRATE JUDGE.
the court is a “Motion to Dismiss for Failure to State
a Claim” filed by defendant Hess Bakken Investment II,
L.L.C. (“Hess Bakken”). For the reasons set forth
below, the motion is denied.
somewhat difficult to navigate, the following appears to be
the essence of what plaintiffs allege in their amended
• On July 8, 2004, Altschuld Oil, L.L.C.
(“Altschuld Oil”), Power Energy Corporation
(“Power Energy”), and Copperhead Corporation
(“Copperhead”) sold numerous oil and gas leases
in western North Dakota to Prima Exploration, Inc.
(“Prima Exploration”), Gunlickson Petroleum,
Inc., Niwot Resources, LLC, Cordillera Energy Partners II,
LLC, Berry Ventures, Inc., and Strata Resources, Inc.
Hereinafter, the sellers will be referred to collectively as
the “Altschuld Group, ” the purchasers
collectively as the “Prima Group, ” and the sale
agreement as the “Altschuld Agreement.” The
Altschuld Agreement included an Area of Mutual Interest
Clause (“Altschuld AMI”). The Altschuld AMI
stated if the Prima Group acquired additional oil and gas
leases within the AMI's described lands that the Prima
Group would in certain instances assign the Altschuld Group
an overriding royalty.
• On the same day, July 8, 2004, Strata Resources, Inc.
(“Strata”) entered into a similar agreement
selling oil and gas leases in western North Dakota to the
Prima Group (hereinafter referred to as the “Strata
Agreement”). The Strata Agreement also included an Area
of Mutual Interest Clause (“Strata AMI”) that
required the Prima Group to in certain instances assign
Strata an overriding royalty if additional oil and gas leases
were acquired within the AMI's described lands.
• In April 2005, Prima Exploration acquired on behalf of
the Prima Group Federal Lease NDM-94456 (“Federal
Lease”) covering Township 155 North, Range 90 West on
portions of Sections 6, 27, 28, and 33 in Mountrail County,
North Dakota. The Federal Lease became effective on May 1,
• The Altschuld Agreement and the Strata Agreement each
contained language recognizing the other agreement and the
net effect of the contract language of both Agreements as
applied to the Federal lease was the Altschuld Group and
Strata collectively were entitled to a 3% overriding royalty
on the production from the Federal Lease.
• In May 2007, the Prima Group sold various oil and gas
interests to Hess Corporation (“Hess”). The sale
included the Federal Lease burdened by a 3% overriding
interest in favor the Altschuld Group and Strata.
• Hess Bakken has succeeded to the interests Hess
acquired from the Prima Group, including the Federal Lease,
and Hess Bakken cannot avoid the obligation to honor the 3%
overriding interest on the production from the Federal Lease
owed the Altschuld Group and Strata based on a claim by it or
Hess that they were not aware of the overriding interest and
were otherwise good faith purchasers for value. This in part
is because there were several documents and records that Hess
necessarily reviewed or obtained the possession of that
referenced the 3% overriding interest.
on these allegations, plaintiffs ask for a declaration that
they have a 3% overriding royalty in the production from the
Federal Lease. They also ask for an accounting for all
amounts owed to them on past production under the Federal
Bakken has moved to dismiss plaintiffs' amended complaint
based upon the sole grounds that plaintiffs' action is
untimely. While normally a motion pursuant to Fed.R.Civ.P.
12(b)(6) is limited to testing the sufficiency of the
complaint and the claim that an action is untimely is an
affirmative defense, Eighth Circuit case law provides that a
defendant can seek the dismissal of a claim pursuant to
motion brought by Rule 12(b)(6) without first answering, if
the defense is clearly established by what is alleged in the
complaint. See, e.g., Joyce v.
Armstrong Teasdale, LLP, 635 F.3d 364, 367 (8th Cir.
2011) (“As a general rule, the possible existence of a
statute of limitations defense is not ordinarily a ground for
Rule 12(b)(6) dismissal unless the complaint itself
establishes the defense.”) (internal quotations and
citing authority omitted).
Hess Bakken has not attempted to argue that the face of the
amended complaint is sufficient to establish the affirmative
defense of statute of limitations. Rather, to support its
argument, Hess Bakken relies upon provisions of the
agreements and instruments referenced in the complaint, but
not attached as exhibits, to support its contentions that (1)
the only possible claim that plaintiffs have is for breach of
an agreement to assign the 3% overriding royalty claimed by
plaintiffs (even though plaintiffs' claims appear to be
broader than that), and (2) the claim for breach of contract
is untimely. Hess Bakken argues that the court can consider
the text of the agreements and instruments accompanying its
motion based on Eighth Circuit case law holding that
materials embraced by the pleadings or that are of a matter
of public record and whose authenticity is not subject to
question may in the court's discretion be considered.
See, e.g., Miller v. Redwood Toxicology
Lab., Inc., 688 F.3d 928, 931 (8th Cir. 2012)
(“‘When considering . . . a motion to dismiss
under Fed.R.Civ.P. 12(b)(6)[ ], the court generally must