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Northern Natural Gas Co. v. L.D. Drilling, Inc.

United States District Court, D. Kansas

March 30, 2018

L.D. DRILLING, INC., VAL ENERGY, INC., NASH OIL & GAS, INC., et al., Defendants.



         This matter is before the court on Nash Oil & Gas, Inc.'s Motion for Judgment on the Pleadings. (Dkt. 620). The motion argues that Northern's claims are barred by res judicata. The argument is essentially the same one made by Nash and rejected by Judge Brown in 2009 (Dkt. 152), but Nash contends the “landscape has changed significantly” and that the matter should be reconsidered. Nash's arguments are no more persuasive than they were in 2009, however, and the court accordingly denies the motion.

         I. Rule 12(c) standards

         The court analyzes a motion for judgment on the pleadings under the same standards governing a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Park Univ. Enters., Inc. v. Am. Casualty Co., 442 F.3d 1239, 1244 (10th Cir. 2006). “To survive a motion to dismiss, a complaint must contain ‘enough facts to state a claim to relief that is plausible on its face.'” The Estate of Lockett by & through Lockett v. Fallin, 841 F.3d 1098, 1106-07 (10th Cir. 2016), cert. denied sub nom. Lockett v. Fallin, 137 S.Ct. 2298 (2017) (quoting Bell Atl.Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible if it pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In reviewing a motion to dismiss, the court must accept as true all well-pleaded allegations and view those allegations in the light most favorable to the non-moving party. See Dias v. City & Cty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009).

         II. Background

         An overview of the litigation surrounding the Cunningham Storage Field is necessary to address Nash's arguments. Northern sued Trans Pacific Oil Corp. (“Trans Pac”) in 2002, claiming that Trans Pac's two “Park Wells” just northwest of the storage field boundary were producing Northern storage gas. Northern Nat. Gas Co. v. Trans Pacific Oil Corp., No. 02-1418-JTM (D. Kan. filed No. 19, 2002). In 2004, Northern sued Nash Oil & Gas, claiming Nash was producing storage gas from four wells located about four miles due north of the Park Wells. Northern Nat. Gas Co. v. Nash Oil & Gas, Inc., No. 04-1295-JTM (D. Kan. filed. Sept. 3, 2004). In 2005, in the Trans Pacific case, a jury found Northern storage gas had not migrated to the two Park Wells after July 1, 1993.[1] The Tenth Circuit subsequently affirmed the judgment. Northern Nat. Gas Co. v. Trans Pacific Oil Corp., 248 F.App'x 882, 2007 WL 2753079 (10th Cir. 2007).

         In March of 2007, this court granted Nash's motion for summary judgment in Case No. 04-1295, on two separate grounds. First, it found Northern's claims for conversion and unjust enrichment were barred by the statutes of limitations (two and three years, respectively), because Northern had reason to believe by 2000 that the challenged Nash wells were producing storage gas. Second, the court found the claims were barred by the collateral estoppel (issue preclusion) effect of the Trans Pacific judgment, because Northern's expert testified there was a single migration pathway from the storage field to the Trans Pac wells to the Nash wells, which was merely “an extension of the theory presented [and rejected by the jury] in the [Trans Pac] case.” (Dkt. 136 at 13). On appeal, the Tenth Circuit affirmed the finding that the claims were barred by the statute of limitations. Northern Nat. Gas Co. v. Nash Oil & Gas, Inc., 526 F.3d 626 (10th Cir. 2008).

         Meanwhile, in 2005, the Federal Energy Regulatory Commission (FERC) found Northern had shown that storage gas was migrating beyond the storage field's boundaries, and it authorized Northern to install additional withdrawal and monitoring wells. Northern installed observation wells to the east of the Park Wells. Northern alleges that as a result, it obtained evidence that storage gas was migrating across a two-mile wide area of the northern boundary, rather than through a narrow channel as it originally believed. In October 2008, FERC authorized Northern to expand the field boundary by 1, 760 acres, finding storage gas had migrated at least to the two Park Wells and into the southern part of a larger 4, 800 extension area proposed by Northern.

         Northern filed suit against Trans Pac in November 2008, alleging Trans Pac had produced storage gas from the Park Wells after the date of the prior jury verdict. The suit was settled in February 2009. Northern Nat. Gas Co. v. Trans Pacific Oil Corp., No. 08-1365-WEB (D. Kan.).

         Northern filed the instant suit on December 23, 2008, against L.D. Drilling, Inc., Val Energy, Inc., and Nash Oil & Gas, Inc. (Dkt. 1). Among other things, the suit challenges production from 25 wells to the north of the 2008 storage field boundary, including five wells completed by Nash subsequent to the filing of Northern's 2004 suit against Nash. The claims in both the initial complaint and the Third Amended Complaint (Dkt. 564) include (among others) conversion, [2] unjust enrichment, and nuisance.

         In May of 2009, Judge Brown granted Northern a preliminary injunction allowing it to test the Nash wells for the presence of storage gas. (Dkt. 60). In November of 2009, Judge Brown denied Nash's motion to dismiss the complaint. (Dkt. 152). He rejected Nash's res judicata argument, finding that under the Restatement's “transactional approach” for determining when two lawsuits constitute the same claim or cause of action, Northern's claims amount to a separate cause of action from the 2004 lawsuit. Judge Brown noted the wells at issue here (with one exception) were not in existence when the 2004 suit was filed, and he found Northern was challenging conduct that occurred after the filing of the first suit. He noted that the wells in this suit were in a different location and were significantly closer to the storage field boundary. Northern alleged that pressure sinks caused by the new wells, and their production of large amounts of water, were unreasonably interfering with Northern's use of the storage field, such that their operation constituted a continuing nuisance. Because “[t]hese allegations involve conduct subsequent to the filing of the 2004 case, ” Judge Brown concluded “that such actions should not be considered part of the same transaction as Case No. 04-1295.” (Id. at 19).

         In December of 2009, Judge Brown denied Northern's request for an injunction to shut-in the Nash wells. (Dkt. 166). Although he found “strong evidence that the gas being produced by the four Nash wells is storage gas from the Cunningham Storage Field, ” he found no irreparable harm because the money from Nash's gas sales was being held in suspense.

         On June 2, 2010, FERC granted Northern authority to condemn a 12, 320-acre portion of the Viola and Simpson formations north of the existing field-the 2010 Extension Area-including the acreage where Nash operated the aforementioned wells. Northern commenced a separate condemnation action. Northern Nat. Gas Co. v. Approx. 9917.53 Acres, No. 10-1232-JTM (D. Kan. filed July 16, 2010).

         In September 2010, Judge Brown granted the defendants partial summary judgment on Northern's conversion claim. He found the claim was barred as to any gas production before June 2, 2010 (the date of the FERC certificate), due to the collateral estoppel effect of a Pratt County District Court judgment which held that Northern ...

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