SPRING CREEK EXPLORATION & PRODUCTION COMPANY, LLC; GOLD COAST ENERGY, LLC, Plaintiffs - Appellants,
HESS BAKKEN INVESTMENT, II, LLC, f/k/a TRZ Energy, LLC; STATOIL OIL & GAS, LP, f/k/a Brigham Oil & Gas, LP, Defendants - Appellees.
from the United States District Court for the District of
Colorado (D.C. No. 1:14-CV-00134-PAB-KMT)
I. Goldstein (John W. Mill and Joseph C. Daniels with him on
the briefs), Sherman & Howard L.L.C., Denver, Colorado,
for Plaintiffs - Appellants.
Cameron P. Pope, Andrews Kurth Kenyon LLP, Houston, Texas
(Alexis J. Gómez, Andrews Kurth Kenyon LLP, Houston,
Texas; Craig L. Stahl, Andrews Kurth Kenyon LLP, The
Woodlands, Texas; and Frank C. Porada, Berenbaum Weinshienk
PC, Denver, Colorado, with him on the briefs), for Defendant
- Appellee Statoil Oil & Gas LP.
S. Safi, Susman Godfrey L.L.P., Houston, Texas (Ashley L.
McMillian and Abigail C. Noebels, Susman Godfrey L.L.P.,
Houston, Texas, and Elizabeth J. Hyatt, Ogborn Mihm, L.L.P.,
Denver, Colorado, with him on the briefs), for Defendant
-Appellee Hess Bakken Investments II, LLC.
LUCERO, McKAY, and McHUGH, Circuit Judges.
matter is before us on Plaintiffs-Appellants'
Petition for Panel Rehearing ("Petition") and
Defendants-Appellees' responses thereto. Upon careful
consideration of the Petition and the responses, we grant the
Petition in part to the extent of the modifications in the
attached revised opinion. Our February 21, 2018 opinion is
withdrawn and replaced by the attached revised opinion.
McHUGH, Circuit Judge.
Spring Creek Exploration & Production Company, LLC
("Spring Creek") and Gold Coast Energy, LLC
("Gold Coast") appeal from four separate district
court orders dismissing contract and tort claims against
Defendants Hess Bakken Investments II, LLC ("Hess")
and Statoil Oil & Gas, LP
("Statoil"). For reasons to follow, we affirm.
case arises out of the oil fields of western North Dakota.
Our story begins around January 2009, when Statoil entered
into two agreements with a Hess affiliate. One of those
agreements the parties call the "Rough Rider
Agreement." The Rough Rider Agreement prohibited Hess
for one year from acquiring any oil or gas interests in the
Rough Rider Prospect (a sizable swath of land in North
Dakota's McKenzie and Williams Counties) in exchange for
Hess's affiliate receiving certain proprietary
information from Statoil.
1. The Tomahawk Agreement
October 8, 2009, still within the one-year non-compete
period, Hess entered into a series of agreements
(collectively, the "Tomahawk Agreement") with
Spring Creek, Gold Coast, and non-party Coachman Energy
relating to the Tomahawk Prospect, a collection of land lying
entirely within the much larger Rough Rider Prospect. As one
part of the Tomahawk Agreement, Spring Creek and Gold Coast
sold all of their oil and gas leasehold interests (covering
about 5, 400 net acres) in the Tomahawk Prospect to Hess in
exchange for an overriding royalty interest
("ORRI") in the hydrocarbons produced under the
terms of the leases. The parties refer to this portion of the
Tomahawk Agreement as the "First Assignment."
Hess's plan for these leases was to drill enough
exploratory wells to prove their value and then sell them to
larger operators. Spring Creek's president, William
Coleman, testified that, at the time of the Tomahawk
transaction, he understood that Hess's intention was to
"drill [the area] up and then sell it." Aplt.
App'x, Vol. XXIII, at 3759, 234:14-21.
another part of the Tomahawk Agreement, Spring Creek, Gold
Coast and Hess executed the "Area of Mutual Interest
Agreement." That agreement (the "AMI
Agreement") established the entire Tomahawk Prospect as
an Area of Mutual Interest ("AMI") for a term of
three years. In relevant part, the AMI Agreement states:
During the term of the AMI, only [Hess] may proceed to lease
or otherwise acquire interests within the AMI. If, during the
term of the AMI, [Hess] should acquire any oil and gas lease,
leasehold interest or mineral interest, [Hess] shall offer
such interest to Coachman in the following proportions,
[Hess] (90%), Coachman (10%), pursuant to that certain
Participation Agreement dated October 8, 2009, by and between
[Hess] and Coachman.
Id. at Vol. II, 304, § 1. The agreement further
provides that "for any oil and gas lease acquired"
by Hess in the AMI during the three-year term, Spring Creek
and Gold Coast would receive ORRIs in those newly acquired
leases, in addition to the ORRIs Spring Creek and Gold Coast
were already slated to receive under the existing leases
transferred to Hess in the First Assignment. Id.
Finally, the AMI Agreement contains two other clauses
relevant to this dispute:
4. Covenant Running with the Land. This AMI and all
rights, covenants and conditions hereof shall be considered
covenants running with the land and shall inure to and be
binding upon the Parties hereto, and their respective
successors and assigns.
5. Confidentiality. The terms of this Agreement are
confidential and no Party, nor any of its respective
affiliates or representatives shall furnish this Agreement,
or disclose any of its contents, to any third party.
Id. at 306.
Hess-Statoil Settlement Agreement
foray into the Tomahawk Prospect did not go unnoticed. On
January 15, 2010, Statoil sent a letter to Hess alleging that
Hess had breached the Rough Rider Agreement by acquiring
leases in the Rough Rider Prospect during the non-compete
period. That letter led to a February 2010 settlement
agreement (the "Hess-Statoil Settlement
Agreement"), in which Hess sold most of its Tomahawk
Prospect leases to Statoil at a discount. Hess further agreed
that any leases it acquired in the Tomahawk Prospect in the
next three months would be offered to Statoil at cost (the
"three-month tail"). In connection with
Statoil's due diligence in executing the Hess-Statoil
Settlement Agreement, Hess disclosed to Statoil the terms of
the AMI Agreement and provided it with a copy. Statoil had no
interest in inheriting Hess's obligations under the AMI
Agreement. To that end, the Hess-Statoil Settlement Agreement
states the assignment of leases from Hess to Statoil does
"not include . . . the Area of Mutual Interest Agreement
dated October 8, 2009, among [Hess] . . ., Spring Creek . . .
and Gold Coast." Id. at Vol. XXXIV, 5760,
Spring Creek nor Gold Coast was privy to the Hess-Statoil
negotiations. After the agreement was finalized, however,
Statoil publicly announced that it had acquired about 10, 000
net acres in the Rough Rider Prospect. And on April 12, 2010,
Hess and Statoil executed an Assignment, Bill of Sale and
Conveyance (the "Second Assignment"), formally
transferring the Tomahawk leasehold interests from Hess to
Statoil. That conveyance was recorded four days later.
The Parties' Dealings After the Hess-Statoil Settlement
to the AMI Agreement, Hess made three assignments to Spring
Creek and Gold Coast of ORRIs in leases that Hess acquired in
the Tomahawk Prospect. The first, completed in April 2010,
included leases acquired through March 24, 2010. The second,
sent to Plaintiffs in June 2010, included nine leases
acquired through March 11, 2010. The third, sent to
Plaintiffs in November 2010, only included leases acquired in
2009. All three assignments referenced "Brigham Leases,
" a reference to Statoil's predecessor, in the
the three-month tail in the Hess-Statoil Settlement Agreement
expired, Hess notified its lease brokers to resume the hunt
for leasing opportunities in the Tomahawk Prospect. Hess was
presented at least one opportunity to acquire a lease in the
Tomahawk Prospect, but declined to follow through because the
lease was relatively small and Hess's strategy was to
acquire acreage in larger quantities. Statoil, meanwhile,
acquired many additional leases in the Tomahawk Prospect
during this time, dozens of which were publicly recorded
it is not clear exactly when Plaintiffs learned of the
Hess-Statoil transaction, on September 13, 2010, Mark
McPherson, Gold Coast's president, sent an email stating,
"We sold Tomahawk to Randy, who flipped to [Hess] until
[Statoil] came to [Hess] and claimed [Hess] violated an
agreement and [Statoil] got to buy [the Tomahawk Prospect
leases] from [Hess]." Id. at Vol. XXVII, 4764.
At his deposition, Mr. McPherson was asked how he knew that
Statoil purchased the Tomahawk Prospect leases from Hess. His
answer: "I think Bill [Coleman, Spring Creek's
president] told me." Id. at Vol. XXIV, 3990,
125:13-125:18. That answer is consistent with the testimony
of Gold Coast's Rule 30(b)(6) deponent, Amy Pfannenstein.
According to Ms. Pfannenstein, Gold Coast knew about the
Hess-Statoil Settlement Agreement in September 2010, and Gold
Coast learned about the agreement from Spring Creek.
Id. at Vol. XXVII, 4672-73, 125:19-126:17.
litigation began on December 13, 2013, when Spring Creek
brought suit against Hess and Statoil in Colorado state
court. The original complaint identified six claims for
1. Breach of Contract (against Hess)
2. Breach of Contract (against Statoil)
3. Breach of the Implied Covenant of Good Faith and Fair
Dealing (against Hess)
4. Tortious Interference with Contract (against Statoil)
5. Fraudulent Concealment (against Hess and Statoil)
6. Civil Conspiracy (against Hess and Statoil)
Creek attached three exhibits to its original complaint:
1. The First Assignment (part of the October 8, 2009,
Tomahawk Agreement, by which Spring Creek and Gold Coast sold
Tomahawk leases to Hess)
2. The AMI Agreement (also part of the Tomahawk Agreement, by
which Spring Creek, Gold Coast, and Hess identified the
Tomahawk area as one of mutual interest)
3. The Second Assignment (part of the Hess-Statoil
Settlement, by which Hess assigned its Tomahawk leases to
January 17, 2014, Statoil removed Spring Creek's suit to
the United States District Court for the District of
Colorado. Hess and Statoil then separately moved to dismiss
district court granted in part and denied in part each
motion. Spring Creek Expl. & Prod. Co., LLC v. Hess
Bakken Inv. II, LLC, No. 14-CV-00134-PAB-KMT, 2014 WL
4400764, at *14 (D. Colo. Sept. 5, 2014) ("Spring
Creek I"). In particular, the district court
dismissed with prejudice Spring Creek's third, fourth,
fifth, and sixth claims for relief. Id. That left
just the breach of contract claims, but even those did not
escape unscathed. As to Hess, the district court dismissed
Spring Creek's breach of contract claim to the extent it
alleged Hess failed to disclose leases acquired after April
2010 and failed to acquire new leases in the AMI.
Id. at *4-5. As to Statoil, the district court
dismissed Spring Creek's breach of contract claim to the
extent it alleged Statoil failed to disclose all leases
acquired by Statoil in the AMI. Id. at *11. The
district court then explained what was left of Spring
. "Plaintiff may proceed with [its]
first claim for relief based on Hess Bakken's alleged
breach of the confidentiality provision and failure to honor
royalty interests in existing leases."
. "Plaintiff may proceed with its
second claim for relief based on Statoil's alleged
failure to assign override interests in new leases to Spring
Creek and failure to honor royalty interests in existing
Id. at *14. Put differently, Spring Creek had two
surviving claims against Hess: (1) that Hess breached the AMI
Agreement's confidentiality provision by disclosing its
terms to Statoil without Spring Creek's consent, and (2)
that Hess breached the AMI Agreement by not paying ORRIs on
the "Existing Leases, " which the original
complaint defines as those leases sold to Hess in the First
Assignment, plus leases acquired by Hess in the AMI through
November 2010. And Spring Creek had two surviving claims
against Statoil: (1) that Statoil failed to pay ORRIs on
those same Existing Leases, and (2) that Statoil failed to
pay ORRIs on the "New Leases, " which the original
complaint defines as those oil and gas leasehold interests
acquired by Statoil within the Tomahawk Prospect after
Statoil entered into the Hess-Statoil Settlement Agreement.
Creek promptly moved for reconsideration of the district
court's order. The district court denied that motion.
Spring Creek Expl. & Prod. Co., LLC v. Hess Bakken
Inv. II, LLC, No. 14-CV-00134-PAB-KMT, 2015 WL 3542699,
at *3 (D. Colo. June 5, 2015) ("Spring Creek II
"). While the reconsideration motion was
pending, Gold Coast moved to intervene as an additional
plaintiff The district court granted Gold Coast's motion.
On April 28, 2015, Plaintiffs filed an amended complaint,
which added Gold Coast as a plaintiff but was otherwise
identical to the original complaint.
the case proceeded through discovery. In May 2015, Hess moved
for partial summary judgment on Plaintiffs' request for
reliance damages. The district court granted that motion in
full. Spring Creek Expl. & Prod. Co., LLC v. Hess
Bakken Inv. II, LLC, No. 14-CV-00134-PAB-KMT, 2016 WL
1170105, at *6 (D. Colo. Mar. 24, 2016) ("Spring
and Statoil thereafter separately moved for summary judgment.
In September 2016, the district court granted in part and
denied in part both motions. Spring Creek Expl. &
Prod. Co., LLC v. Hess Bakken Inv. II, LLC, No.
14-CV-00134-PAB-KMT, 2016 WL 9735145, at *17 (D. Colo. Sept.
8, 2016) ("Spring Creek IV"). As to Hess,
the district court held Plaintiffs' claims for breach of
the AMI Agreement's confidentiality provision were
time-barred. Id. at *14. As to Statoil, the district
court held that Statoil was not an assignee of the AMI
Agreement; it partially granted Statoil's motion for
summary judgment on that basis. Id. at *10-11. As to
both Hess and Statoil, the district court denied their
motions for summary judgment on Plaintiffs' breach of
contract claims for underpayment of royalties on the Existing
Leases. Id. at *11, 15.
than proceed to trial on the underpayment-of-royalties
claims, the parties jointly moved to dismiss the remaining
claims without prejudice, as all preferred to arbitrate them
instead. Indeed, the parties executed an Agreement to
Arbitrate dated December 7, 2016. On December 15, the
district court granted in part the stipulated motion to
dismiss the Existing Leases claims. It entered final judgment on
December 16 and an amended final judgment on December 21,
2016. This appeal timely followed.
with the parties' briefing in this court, the Existing
Lease claims were resolved in arbitration. In October 2017,
an arbitrator dismissed with prejudice Spring Creek's
Existing Lease claims against both Hess and Statoil. And in
November 2017, upon stipulation of the parties, the same
arbitrator awarded Gold Coast $82, 924.96 from Statoil and
dismissed Gold Coast's claims against Hess, with
addressing the merits, we first dispose of two jurisdictional
questions. The first concerns the district court's
subject matter jurisdiction; the second, our appellate
jurisdiction. For the reasons that follow, we conclude we do
have jurisdiction to decide this appeal.
District Court's Subject Matter Jurisdiction
parties all agree that the district court had diversity
jurisdiction pursuant to 28 U.S.C. § 1332(a). But we
have "an independent obligation to determine whether
subject-matter jurisdiction exists, even in the absence of a
challenge from any party." Arbaugh v. Y&H
Corp., 546 U.S. 500, 514 (2006). "To determine
whether a party has adequately presented facts sufficient to
establish federal diversity jurisdiction, appellate courts
must look to the face of the complaint, ignoring mere
conclusory allegations of jurisdiction." Penteco
Corp. v. Union Gas Sys., Inc., 929 F.2d 1519, 1521 (10th
Cir. 1991) (citations omitted). "The party seeking the
exercise of jurisdiction in his favor 'must allege in his
pleading the facts essential to show jurisdiction.'"
Id. (quoting McNutt v. General Motors Acceptance
Corp., 298 U.S. 178, 189 (1936)). "Ordinarily,
'the jurisdiction of the Court depends upon the state of
things at the time of the action brought, and . . . after
vesting, it cannot be ousted by subsequent events.'"
Price v. Wolford, 608 F.3d 698, 702 (10th Cir. 2010)
(quoting Mullan v. Torrance, 22 U.S. (9 Wheat.) 537,
plaintiffs in this case are limited liability companies.
Although an open question in the Tenth Circuit, the
"majority rule" is that, for diversity purposes, a
limited liability company is a citizen of every state in
which its members reside. See Shannon's Rainbow, LLC
v. Supernova Media, Inc., 683 F.Supp.2d 1261, 1266-67
& n.23 (D. Utah 2010) (collecting cases); accord
Carden v. Arkoma Assocs., 494 U.S. 185, 189, 195 (1990)
(holding that, corporations aside, "for diversity
purposes, the citizenship of an artificial entity . . .
depends on the citizenship of 'all the
members'") (quoting Chapman v. Barney, 129
U.S. 677, 682 (1889)). In their Disclosure Statement to this
court, Plaintiffs assert (a) at the time Spring Creek filed
its state court complaint, all five of its members were
citizens of Colorado, and (b) at the time Gold Coast
intervened in this suit, both of its members were citizens of
Colorado. These assertions are not supported by citations to
the appellate record.
never pleaded the citizenship of Spring Creek's members.
Recall that Spring Creek's initial complaint was filed in
state court. In that original complaint, Spring Creek alleged
only that it "is a Colorado limited liability company
with its principal place of business located" in
Colorado. Aplt. App'x, Vol. I, at 56, Compl. ¶ 1.
Being a state-court complaint, it did not allege federal
jurisdiction. Id. at 57, Compl. ¶¶ 5-7.
After Gold Coast was permitted to intervene, Plaintiffs filed
an Amended Complaint, which remains the operative complaint
in this action. In their Amended Complaint ("AC"),
Plaintiffs alleged in relevant part:
1. Spring Creek is a Colorado limited liability company with
its principal place of business located at 1200 17th St.,