DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO 1437 Bannock St. Denver, Colorado 80202 Plaintiff: RETOVA RESOURCES, LP, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED v. Defendant: BILL BARRETT CORPORATION DATE FILED: April 24, 2018 1:57 PM CASE NUMBER: 2015CV34351 COURT USE ONLY Case No: Courtroom: 259 2015CV34351 ORDER RE DEFENDANT S RENEWED MOTION TO DISMISS THIS MATTER is before the Court on Bill Barrett Corporation s ( Defendant ) renewed Motion to Dismiss Plaintiff Retova Resource, LP s ( Plaintiff ) Complaint for lack of subject matter jurisdiction pursuant to C.R.C.P 12(b)(1). The Court has reviewed the Motion, Plaintiff s Response, Defendant s Reply, all pertinent pleadings and authority, and being otherwise fully advised in the premises, finds and orders as follows: FACTUAL AND PROCEDURAL BACKGROUND Defendant is an oil and natural gas exploration and production company, registered with the Colorado Oil and Gas Conservation Commission ( COGCC ) as an Operator. Def. Mot. to Dismiss at 2. Defendant has been the Operator of certain wells in Colorado. Id. Plaintiff represents individuals who have entered into lease agreements with Defendant; the lease agreements contain Silent Royalty Agreements. Pl. Am. Compl. at 2. On December 14, 2015, Plaintiff served Defendant with a Class Action Complaint and Demand for Jury Trial, setting forth claims arising from Defendant s alleged underpayment of royalties on natural gas production by improperly deducting post-production costs. Id. Plaintiff brought three claims against Defendant: (1) failing to pay full royalties due by wrongly deducting costs for making the gas marketable, failing to pay royalties on full commercial market value, and engaging in transactions that unreasonably reduced royalties; (2) breach of implied duty to market; and (3) breach of good faith and fair dealing. As pertinent here, the Silent Royalty Agreements do not address the allocation of postproduction costs incurred after the natural gas is severed from the wellhead in order to render production marketable and deliver it to the commercial market. On January 4, 2016, Defendant filed a Motion to Dismiss, claiming that Plaintiff failed to exhaust their administrative remedies with COGCC. On March 11, 2016, the Court denied 1
Defendant s Motion to Dismiss, holding that it could determine whether a bona fide dispute existed regarding the interpretation of the lease agreements and that Plaintiff sufficiently pled a contract dispute. On February 5, 2018, Defendant renewed its instant Motion, arguing that a majority of recent case law supports its argument: the Complaint should be dismissed without prejudice because Plaintiff failed to exhaust administrative remedies pursuant to the Colorado Oil and Gas Conservation Act, C.R.S. 34-60-101, et seq., ( Act ). Specifically, Defendant states that Plaintiff failed to bring the immediate action in front of the COGCC prior to filing the present lawsuit, depriving this Court of subject matter jurisdiction. Plaintiff does not dispute that it did not exhaust its administrative remedies with the COGCC prior to filing this suit. Additionally, Defendant argues that Plaintiff s claims are solely issues of fact to be determined by the COGCC. Defendant s Renewed Motion to Dismiss has been fully briefed and is ripe for disposition. LEGAL STANDARD The Court construes Defendant s Renewed Motion to Dismiss as a Motion to Reconsider. A motion for reconsideration is not specifically delineated in C.R.C.P. 59 and is generally discouraged. Stone v. People, 895 P.2d 1154, 1155 (Colo. App. 1995). But, reconsideration motions may be treated as post-trial relief motions, i.e., a motion to alter or amend findings or the judgment. Catlin v. Tormey Bewley Corp., 219 P.3d 407, 415 (Colo. App. 2009). Ordinarily, when a court issues a final decision, that decision stands and is not subject to relitigation. Vashone-Caruso v. Suthers, 29 P.3d 339, 342 (Colo. App. 2001). However, where a prior ruling results in error, is no longer sound because of changed conditions, or results in manifest injustice, a court may reconsider its prior ruling. People v. Roybal, 672 P.2d 1003, 1005 n.5 (Colo. 1983). Although the decision to grant a motion for reconsideration is within the discretion of the trial court, the movant must show that reconsideration is warranted. See Aldrich v. Dist. Court of Eighteenth Judicial Dist. In and For Arapahoe Cnty, 714 P.2d 1321, 1325 (Colo. 1986). A C.R.C.P. 12(b)(1) motion to dismiss is properly granted when the Court lacks subject matter jurisdiction. In this case, the Colorado Oil and Gas Conservation Act (the Act ) is the primary means of regulating development, production, and utilization of gas and oil in Colorado. The Act gives the Colorado Oil and Gas Conservation Commission ( COGCC ) authority to make rules, regulations, and orders necessary to enforce the Act. In particular, C.R.S. 34-60-118.5(5) provides: Absent a bona fide dispute over the interpretation of a contract for payment, the oil and gas conservation commission shall have jurisdiction to determine the following: (a) The date on which payment of proceeds is due a payee under subsection (2) of this section; (b) The existence or nonexistence of an occurrence pursuant to subsection (3) of this section which would justifiably cause a delay in payment; and (c) The amount of the proceeds plus interest, if any, due a payee by a payer. Section 34-60-118.5(5.5) provides: 2
Before hearing the merits of any proceeding regarding payment of proceeds pursuant to this section, the oil and gas conservation commission shall determine whether a bona fide dispute exists regarding the interpretation of a contract defining the rights and obligations of the payer and payee. If the commission finds that such a dispute exists, the commission shall decline jurisdiction over the dispute and the parties may seek resolution of the matter in district court. A court s primary task when construing a statute is to ascertain and give effect to the legislature's intent. Springer v. City & Cnty. of Denver, 13 P.3d 794, 799 (Colo. 2000); see also State v. Nieto, 993 P.2d 493, 502 (Colo. 2000) ( Legislative intent is the polestar of statutory construction. ). A court looks first to the language of the statute, giving words their plain and ordinary meaning; if the plain language of the statute demonstrates a clear legislative intent, the court looks no further. Springer, 13 P.3d at 799. Under the Act, the COGCC has primary jurisdiction to hear matters concerning royalty payments where there is no dispute as to the interpretation of the contract. Grant Bros. Ranch, LLC v. Antero Res. Piceance Corp., No. 15CA2063 (Colo. App. Dec. 1, 2016). Pursuant to the Act, the COGCC must determine whether a royalty payment dispute involves contract interpretation. C.R.S. 34-60-118.5(5.5). If the COGCC determines that the royalty payment dispute does involve a contract interpretation, then it must decline jurisdiction. Id. Generally, if complete, adequate, and speedy administrative remedies are available, a party must generally exhaust those remedies before filing suit in district court. City and Cnty of Denver v. United Air Lines, Inc., 8 P.3d 1206, 1212 (Colo. 2000). This doctrine enables the agency to make initial determinations on matters within its expertise and compile a record adequate for judicial review. State v. Golden s Concrete Co., 962 P.2d 919, 923 (Colo. 1998). Failure to exhaust administrative remedies may deprive a court of jurisdiction to grant the requested relief. Horrell v. Dept. of Admin., 861 P.2d 1194, 1197 (Colo. 1993). However, there is an exception that a plaintiff need not exhaust potential administrative remedies if the administrative authority lacks the authority to rule on the question raised. Id. In addition, the Act expressly states an exception by excluding the COGCC s jurisdiction from any bona fide dispute over the interpretation of a contract for payment. C.R.S. 34-60- 118.5(5). It is this clause that Plaintiff s solely rely on in contending that they are not required to exhaust administrative remedies with the COGCC. Specifically, Plaintiff claims its raised a contractual dispute regarding post-production costs, and thus the COGCC does not have jurisdiction over the matter. DISCUSSION The basis for the Court s previous Order Denying Defendant s Motion to Dismiss has been called into question. On March 11, 2016, the Court determined that the COGCC did not have exclusive jurisdiction to determine whether the parties raised a bona fide dispute over the interpretation of contract. See Or. Denying Def. Mot. to Dismiss. Specifically, the Court found that 3
Section 34-60-118.5(5.5) does not contain any mandatory language directed at a payee. Nowhere does the statute provide that COGCC is the only body that can determine jurisdiction or that a payee must bring an action with the COGCC prior to seeking resolution of the matter in district court. The Court further found that Plaintiff sufficiently alleged a bona fide dispute concerning the interpretation of the royalty and lease agreements, removing jurisdiction from the COGCC. Id. Since the Court s previous Order, there has been an overwhelming shift in Colorado s application of 34-60-118.5(5.5). Most notably, in Grant Brothers Ranch, L.L.C. v. Antero Resources Piceance Corporation, ---P.3d---, 15CA2063 (Colo. App. Dec. 1, 2016), a division of the Colorado Court of Appeals held that the COGGC has primary jurisdiction over disputes regarding payments of proceeds. As pertinent here, the Grant Brothers division affirmed a trial court s ruling that the plaintiff was required to exhaust administrative remedies with the COGCC prior to seeking resolution in district court against defendant operators for payment of proceeds. Grant Brothers similarly involves a claim for payment of proceeds under C.R.S. 34-60-118.5; however, unlike the current matter, the Grant Brothers parties did not have a contract. Although the facts in Grant Brothers are distinguishable, the holding remains applicable: the Court of Appeals found that 34-60-118.5 requires a payee (at least in that case) 1 to exhaust administrative remedies with the COGCC before seeking resolution in district court. This holding expressly contradicts the Court s previous Order finding that 34-60-118.5 did not contain direct language to a payee. In addition to the appellate decision, twelve Colorado district courts have recently decided matters identical to the present lawsuit and all twelve cases were dismissed without prejudice for the plaintiff s failure to exhaust administrative remedies with the COGCC. 2 Therefore, in light of the change in case law, the Court finds that reconsideration of its prior Order is warranted. I. Jurisdiction Defendant claims that the COGCC must initially determine whether a bona fide dispute exists regarding the interpretation of a contract pursuant to 34-60-118.5(5.5). In support of its contention, Defendant argues that 34-60-118.5(5.5) prescribes the mandatory procedure which 1 The Grant Brothers decision does not address or resolve the issue of whether a plaintiff alleging a contract dispute concerning post-production costs is required to exhaust administrative remedies with the COGCC prior to filing a suit in district court. However, because the appellate decision holds that the Act directs a payee-plaintiff to exhaust administrative remedies, the Court s prior interpretation is no longer grounded in good law. 2 C&M Res., LLC v. Extraction Oil & Gas, Inc., Case No. 2017CV30685 (Denver Dist. Ct. Mar. 2, 2018); Jerry Jones, et al. v. Antero Resources Corp. et al., No. 2017CV30033 (Garfield Cty. Dist. Ct. Jan. 19, 2018); Energy Investments, Inc. v. Antero Resources Corp. et al., No. 2016CV30261 (Garfield Cty. Dist. Ct. Jan. 19, 2018); Daniels Petroleum Co. et al. v. Antero Resources Corp. et al., No. 2016CV30265 (Garfield Cty. Dist. Ct. Jan. 19, 2018); McClintock & Nikoloric LLC et al. v. Bill Barrett Corp., No. 2017CV34092 (Denver Dist. Ct. Dec. 20, 2017); Freeman Invs. v. Bill Barrett Corp., No. 2017CV32667 (Denver Dist. Ct. Nov. 6, 2017); Casey v. Antero Res. Corp., et al., No. 2017CV30071 (Garfield Cty. Dist. Ct. August 17, 2017); Shuster, et al. v. Antero Res. Corp., et al., No. 2017CV30049 (Garfield Cty. Dist. Ct. August 16, 2017); Shidelerosa, et al. v. Antero Res. Corp., et al., No. 2016CV30280 (Garfield Cty. Dist. Ct. August 16, 2017); Limbach v. Antero Res. Corp., No. 2016CV30263 (Garfield Cty. Dist. Ct. July 31, 2017); Airport Land Partners, Ltd. v. Antero Res. Corp., No. 2016CV30259 (Garfield Cty. Dist. Ct. July 31, 2017); Miller Land & Cattle Co. v. Bill Barrett Corp., No. 2016CV30102 (Garfield Cty. Dist. Ct. Mar. 6, 2017). 4
requires a payee, such as Plaintiff, to bring an action with the COGCC prior to seeking resolution of the matter in a district court. Further, Defendant argues that in light of Grant Brothers, the Court s previous determination that it had concurrent jurisdiction, because 34-60-188.5(5.5) does not expressly require a payee to seek COGCC remedies prior to filing suit, is unsupported by law. On the other hand, Plaintiff argues that the COGCC does not have jurisdiction because Plaintiff s claims involve a contractual dispute. The threshold issue is whether the Court has jurisdiction to determine whether a bona fide dispute over the interpretation of contract for payment exists. The applicable section 34-60-118.5(5.5) provides: Before hearing the merits of any proceeding regarding payment of proceeds pursuant to this section, the oil and gas conservation commission shall determine whether a bona fide dispute exists regarding the interpretation of a contract defining the rights and obligations of the payer and payee. If the commission finds that such a dispute exists, the commission shall decline jurisdiction over the dispute and the parties may seek resolution of the matter in district court. Defendant contends that the Act gives initial and primary jurisdiction to the COGCC to determine (1) whether it retains jurisdiction to resolve the matter, and (2) whether a bona fide dispute over the interpretation of a contract exists, absolving the agency of jurisdiction. Plaintiff claims that the Court s prior interpretation and holding was proper, and that the district court has jurisdiction to determine whether a bona fide dispute exists. In support, Plaintiff cites Retova v. Vanguard Permian, LLC, 16CA670 (Colo. App. June 2, 2016), where the Colorado Court of Appeals denied an interlocutory appeal of a trial court s order denying a defendant s motion to dismiss a complaint for plaintiff s failure to exhaust administrative remedies with the COGCC. Pl. Ex. 4. The denial of an interlocutory appeal is not an opinion on the merits of the case. Further, the underlying trial court order did not analyze the defendant s jurisdiction claims or make any findings; as such it is not insightful to the present situation. Plaintiff also cites Grant Brothers Ranch, LLC v. Antero Resources Piceance Corporation, Case No. 15CA2063, 2016 WL 7009138 (Colo. App. December 1, 2016), which it claims reaffirms Grynberg v. Colorado Oil & Gas Conservation Com n, 7 P.3d 1060 (Colo. App. 1999). In Grynberg, the Colorado Court of Appeals affirmed an order of the COGCC, holding that the oil and gas commission lacked jurisdiction to interpret any royalty agreement to determine the propriety of disputed post-production deductions. 7 P.3d 1060. There, as in the present situation, a dispute arose between [the operators and the royalty owners] with respect to whether [the operators] were entitled under the terms of the lease to deduct certain post-production expenses in computing the royalties due to [the royalty owners]. Id. at 1062. However, unlike Plaintiff, in Grynberg, [The royalty owners] initially commenced an action at law to recover royalties from [the operators]. Later, however, they filed an application with the Commission pursuant to 34-60-118.5, as it existed prior to recent amendments... to have the Commission determine the amount of royalties owed by [the operators], and the district court stayed its proceedings, pending final action by the Commission. 5
Although the royalty owners in Grynberg did not file an application to determine whether the COGCC has primary jurisdiction, they recognized that the first step pursuant to 34-60-118.5 was to file with the COGCC, not to file an action with the district court. The COGCC s primary jurisdiction is further supported by the plain language of the statute. As explained in Grynberg, the General Assembly amended the Act in 1998, clarifying its intent to exclude bona fide contractual disputes from the COGCC s jurisdiction. 34-60-118.5. And, as further explained in Grant Brothers, the Act s amendments did not change the COGCC s primary jurisdiction over disputes for payment of proceeds. See Grant Brothers, 16 COA 178, 30. Grant Brothers does state that claims involving a bona fide dispute over the interpretation of a contract for payment should be brought in district court. Id. However, Grant Brothers does not address or resolve whether the COGCC was first required to determine whether a bona fide dispute exists prior to filing an action in district court. Id. Based on the overall statutory scheme and the language in Grant Brothers opining that the Act directs plaintiff-payees to comply with the COGCC, the Court now finds that the Act confers initial and primary jurisdiction to the COGCC for several reasons. First, the Act expressly states that the oil and gas commission shall determine whether a bona fide dispute exists regarding the interpretation of a contract. 34-60-118.5(5.5). The language does not support a finding that a district court has concurrent jurisdiction to determine whether a bona fide contractual dispute exists. See id. Further, the statute expressly states that if the COGCC finds a dispute exists, the parties may seek resolution in district court. Id. On that basis, the Court finds that the COGCC has initial jurisdiction to determine whether an issue concerning payment of proceeds pursuant to 34-60- 118.5 involves a bona fide dispute regarding the interpretation of a contract, and only after said determination, may a party seek resolution in district court. This interpretation is supported by the overall statutory scheme of the Act, which bestows primary jurisdiction to the COGCC for disputes involving payment of proceeds, such as the present claim. See 34-60-118.5(5.5). The statute allows for a jurisdiction exception when and if the COGCC determines that a question of law regarding contract interpretation exists. Id. Therefore, for the reasons stated above, the Court holds that the Act confers initial, primary jurisdiction to the COGCC to determine (1) whether it has jurisdiction over the payment of proceeds dispute, and (2) whether a claim concerning payment of proceeds pursuant to 34-60-118.5 involves a bona fide dispute over the interpretation of a contract, removing jurisdiction from the commission. As such, the Court improvidently found that it could initially determine whether a bona fide dispute exists. Having determined that the COGCC has primary jurisdiction to determine whether a bona fide contractual dispute exists, the Court must next determine whether Plaintiff was required to exhaust the COGCC s administrative remedies prior to filing the present litigation. II. Administrative Remedies The COGCC is an agency, which outlines administrative remedies, and the parties do not dispute that Plaintiff did not exhaust administrative remedies with the COGCC prior to filing this lawsuit. As such, the sole issue is whether Plaintiff was required to exhaust administrative remedies pursuant to 34-60-118.5. 6
Plaintiff contends that it is not required to exhaust the COGCC s administrative remedies, i.e., file an application with the COGCC to determine whether the agency has jurisdiction, because pursuant to Grynberg and Grant Brothers, the COGCC lacks the authority to rule on the contractual issues regarding disputed post-production deductions. In Colorado, when the administrative agency does not have the authority to grant the requested relief, and the available administrative remedies are ill-suited for providing such relief, administrative exhaustion is not required. Brooke v. Rest. Servs., Inc., 906 P.2d 66, 71 (Colo. 1995). However, the doctrine of exhaustion of administrative remedies is subject to limited exceptions. For example, a plaintiff need not exhaust potential administrative remedies if the administrative authority lacks the authority to rule on the question raised. Horrell v. Dept. of Admin., 861 P.2d 1194, 1197 (Colo. 1993). Plaintiff cites three authorities to support its position that exhaustion is not required, arguing that the COGCC and Colorado case law has consistently held that the COGCC does not have jurisdiction over contract disputes. First, Plaintiff relies on Grynberg, where the Court of Appeals affirmed the COGCC s order that it lacked jurisdiction to resolve a contractual dispute concerning whether operators are entitled to deduct post-production expenses in calculating royalties. Grynberg, 7 P.3d 1060. Second, Plaintiff cites The Matter of Payment of Proceeds from the Production of Oil and Gas as Established by Section 34-60-118.5, C.R.S., Wattenberg Field, Weld County, Colorado (May 2017) ( COGCC Order ) in which the COGCC re-affirmed its prior determination that pursuant to Grynberg, it did not have jurisdiction to interpret any agreement to determine the propriety of disputed post-production deductions. Pl. Ex. 6. Third, Plaintiff cites Crighton v. Augustus Energy Resources, LLC, 15CV00835-KLM (D.Colo. June 9, 2017), which held that the Act does not require a plaintiff to file in district court only after a COGCC determination that the dispute is contractual in nature, because exhaustion would likely be futile. Here, the Court finds that Plaintiff failed to prove that it was not required to exhaust administrative remedies with the COGCC prior to filing the present lawsuit. Plaintiff relies on three authorities, two of which are not binding, and the third, Grynberg, is procedurally different than the case at hand. First, the COGCC Order does not address the issue of whether Plaintiff is required to exhaust administrative remedies with the COGCC prior to filing an action with the district court. Pl. Ex. 6. In reviewing the COGCC Order, the COGCC outlines the dispute, determines that the issue involves terms and obligations under the parties agreement, and holds that the commission lacks jurisdiction to entertain the controversy. Id. Notably, the COGCC Order does exactly what Defendant argues is required pursuant to the Act: the COGCC determines whether the parties have a bona fide dispute and whether the commission retains jurisdiction to resolve the controversy. Second, in an order denying a defendant s motion to dismiss, the United States District Court for the District of Colorado relied on the above-referenced COGCC Order in holding that exhaustion would be futile. Pl. Ex. 7. The District Court s order is not binding, nor is it overwhelmingly persuasive. Although Plaintiff submits the COGCC Order declining jurisdiction over a contract dispute, the order is not sufficient evidence that exhaustion would be futile. Instead, the Court finds the COGCC Order reaffirms its finding that the Act gives initial and primary jurisdiction to the COGCC. See supra. Third, Grynberg reaffirms the COGGC s initial determination that it lacked jurisdiction over a matter because it involved a contractual dispute. Grynberg, 7 P.3d at 1063. Plaintiff s argument that Grynberg stands for the proposition that a mere contractual dispute allegation regarding post-production costs summarily allows a district court to have jurisdiction over the matter is unavailing. See supra. Grynberg does not address whether a plaintiff merely 7
alleging a contract dispute may bypass the COGCC and file an action with the district court. See id. Instead, the procedural posture in Grynberg reaffirms the finding that the Act gives the COGCC primary and initial jurisdiction to determine whether it has jurisdiction over the claim concerning payment of proceeds and whether a bona fide contractual dispute exists. See 34-60-118.5. Ultimately, Plaintiff has failed to provide sufficient evidence that it was not required to exhaust administrative remedies with the COGCC prior to filing the present action with the Court. On that basis, the Court finds that reconsideration of its prior Order is warranted and VACATES its March 11, 2016 Order Denying Defendant s Motion to Dismiss. The Court hereby GRANTS Defendant s Motion to Dismiss, finding that the Court lacks subject matter jurisdiction to entertain Plaintiff s claim concerning payment of proceeds pursuant to 34-60-118.5 for failure to exhaust administrative remedies with the COGCC. CONCLUSION WHEREFORE, for the reasons stated above, the Court finds that reconsideration of its prior Order is warranted. As such, the Court s prior March 11, 2016 Order Denying Defendant s Motion to Dismiss is now VACATED. The Court hereby GRANTS Defendant s Motion to Dismiss, finding that the Court lacks subject matter jurisdiction to entertain Plaintiff s claim concerning payment of proceeds pursuant to 34-60-118.5 for failure to exhaust administrative remedies with the COGCC. Accordingly, this matter is hereby DISMISSED WITHOUT PREJUDICE. Further, all pending discovery matters are hereby DENIED AS MOOT, including Defendant s and Nonparty Enterprise s Motions for Sanctions against Plaintiff for Violating Protective Order. SO ORDERED. Dated this 24th day of April, 2018. BY THE COURT: MICHAEL A. MARTINEZ District Court Chief Judge 8