Hystad Ceynar Minerals, LLC v. Whiting Oil and Gas Corporation

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Hystad Ceynar Minerals, LLC, )
on behalf of itself and a class of similarly )
situated persons, )
) ORDER GRANTING DEFENDANT’S
Plaintiff, ) MOTION TO DISMISS AND MOTION
) TO STRIKE CLASS ALLEGATIONS
vs. )
) Case No. 1:22-cv-138
Whiting Oil and Gas Corporation, )
)
Defendant. )
______________________________________________________________________________
Before the Court is the Defendant’s motion to dismiss and motion to strike class allegations
filed on October 17, 2022. See Doc. No. 11. The Plaintiff filed a response in opposition to the
motion on November 1, 2022. See Doc. No. 13. The Defendant filed a reply on November 14,
2022. See Doc. No. 15. The Plaintiff filed a motion for leave to file a second amended class action
complaint on May 9, 2023. See Doc. No. 17. For the reasons set forth below, the motion to dismiss
and motion to strike class allegations are granted and the motion for leave to file a second amended
class action complaint is denied.
I. BACKGROUND
The Plaintiff, Hystad Ceynar Minerals, LLC, (“Hystad”), is a North Dakota limited liability
company. The Defendant, Whiting Oil and Gas Corporation (“Whiting”), is a Delaware
corporation. Whiting owns and operates numerous oil and gas wells in North Dakota.
This action is brought on behalf of the Plaintiff and a proposed class of similarly situated
persons. Since August 12, 2016, Hystad has owned an interest in oil and gas produced from wells
Whiting operates in North Dakota. The first amended complaint alleges Whiting made untimely
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payments to the Plaintiff and class members without paying 18% interest as required by N.D.C.C.
§ 47-16-39.1 Hystad defines the proposed class as:
All non-excluded persons or entities owning mineral interests in North Dakota
wells who: (1) received untimely payments from Defendant for proceeds associated
with oil and gas production at any time since August 12, 2016; and (2) whose
payments did not include the eighteen percent per annum interest as required by
N.D.C.C. § 47-16-39.1.
Excluded from the Class are: (1) Defendant, its affiliates, predecessors, employees,
officers, and directors; and (2) persons who own mineral interests which are owned
or managed by the Board of University and School Lands of the State of North
Dakota.
See Doc. No. 1, ¶ 21.
Whiting filed for bankruptcy in April 2020 in the Bankruptcy Court for the Southern
District of Texas. See In re Whiting Petroleum Corp., No. 20-32021 (Bankr. S.D. Tex. 2020). The
bankruptcy court confirmed its plan in August 2020. In November 2020, Hystad filed an action in
the District of North Dakota against Whiting related to Whiting’s failure to pay interest on
untimely payments. See Hystad Ceynar Minerals, LLC v. Whiting oil and Gas Corp. No. 1:30-cv-
216 (D.N.D. 2020). The parties filed a stipulation for dismissal with prejudice on June 4, 2021. Id.
Then on June 7, 2021, the bankruptcy court enjoined Hystad from taking any further action against
Whiting with respect to any prepetition claims. See In re Whiting Petroleum Corp., No. 20-32021.
Hystad initiated this action on August 24, 2022. See Doc. No. 1. On September 23, 2022,
Hystad filed its first amended complaint asserting two claims on behalf of itself and a class of
similarly situated persons. See Doc. No. 10. In claim one Hystad seeks unpaid interest on untimely
payments made by the Defendant to class members since August 12, 2016, pursuant to N.D.C.C.
§ 47-16-39.1. However, Hystad itself seeks damages related to Whiting’s failure to pay interest on
untimely payments after June 4, 2021, in light of the parties’ previous stipulation in the 2020 case.
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In claim two Hystad seeks a declaration that Whiting is required to pay Hystad and the class
members interest on all future untimely payments.
On October 17, 2022, Whiting filed a motion to dismiss the Plaintiff’s first amended
complaint and strike class allegations. See Doc. No. 11. Whiting requests the Court strike the class
allegations, dismiss the declaratory judgment claim, and dismiss the claim for statutory interest on
untimely payments to the extent it asserts claims that have been discharged by prior bankruptcy
orders, and to the extent it asserts claims that fall outside the statute of limitations.
On May 9, 2023, the Plaintiff filed a motion for leave to file a second amended class action
complaint. See Doc. No. 17. The proposed second amended complaint removes claims against
Whiting that arose prior to September 1, 2020. See Doc. No. 17-1. The Plaintiff filed the motion
in response to Whiting’s “Motion for Entry of an Order to Appear and Show Cause as to Why
Hystad Ceynar Minerals, LLC is Not in Contempt of (1) the Agreed Order on Reorganized
Debtors’ Motion to Enforce Confirmation Order AND (2) the Confirmation Order” filed in
Whiting’s Bankruptcy case in Texas. See In re Whiting Petroleum Corp., No. 20-32021. The
proposed second amended complaint does not change the date in which Hystad’s alleged claims
arose. Hystad itself still seeks recovery for untimely payments made since June 4, 2021. See Doc.
No. 17-1.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(1) governs motions to dismiss for lack of subject
matter jurisdiction. “Subject matter jurisdiction defines the court’s authority to hear a given type
of case.” Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009). Jurisdictional issues are
a matter for the court to resolve prior to trial. Osborn v. United States, 918 F.2d 724, 729 (8th Cir.
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1990). The Plaintiff bears the burden to prove subject matter jurisdiction exists. Herden v. United
States, 726 F.3d 1042, 1046 (8th Cir. 2013).
“A court deciding a motion under Rule 12(b)(1) must distinguish between a ‘facial attack’
and a ‘factual attack’ on jurisdiction.” Osborn, 918 F.2d at 729 n.6. In a facial attack, “the court
restricts itself to the face of the pleadings, and the non-moving party receives the same protections
as it would defending against a motion brought under Rule 12(b)(6).” Id. (internal citations
omitted). “In a factual attack, the court considers matters outside the pleadings, and the non-
moving party does not have the benefit of 12(b)(6) safeguards.” Id. (internal citation omitted). If a
defendant wishes to make a factual attack on “the jurisdictional allegations of the complaint, the
court may receive competent evidence such as affidavits, deposition testimony, and the like in
order to determine the factual dispute.” Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993).
In this case, the parties dispute factual allegations relevant to the court’s jurisdiction over
the Plaintiff’s declaratory judgment claim. Therefore, the Court will treat the motion as a factual
attack. The Court may consider matters outside the pleadings to the extent necessary in ruling on
the motion. See Buckler v. United States, 919 F.3d 1038, 1044 (8th Cir. 2019); Harris v. P.A.M.
Transp., Inc., 339 F.3d 635, 637 n. 4 (8th Cir. 2003).
III. LEGAL DISCUSSION
Hystad brings this case on behalf of itself and class members pursuant to N.D.C.C. § 47-
16-39.1 which governs the obligation of an operator arising under an oil and gas lease to pay
royalties to a mineral owners and a mineral owner’s assignees. N.D.C.C. § 47-16-39.1 provides:
If the operator under an oil and gas lease fails to pay oil or gas royalties to the
mineral owner or the mineral owner's assignee within one hundred fifty days after
oil or gas produced under the lease is marketed and cancellation of the lease is not
sought or if the operator fails to pay oil or gas royalties to an unleased mineral
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interest owner within one hundred fifty days after oil or gas production is marketed
from the unleased mineral interest owner's mineral interest, the operator thereafter
shall pay interest on the unpaid royalties, without the requirement that the mineral
owner or the mineral owner's assignee request the payment of interest, at the rate
of eighteen percent per annum until paid…This section does not apply if mineral
owners or their assignees elect to take their proportionate share of production in
kind, in the event of a dispute of title existing that would affect distribution of
royalty payments, or if a mineral owner cannot be located after reasonable inquiry
by the operator; however, the operator shall make royalty payments to those mineral
owners whose title and ownership interest is not in dispute.
N.D.C.C. § 47-16-39.1(1).
A. Motion to Strike Class Allegations
Whiting contends the class allegations contained in the first amended complaint fail the
typicality requirements of Rule 23 of the Federal Rule of Civil Procedure. Whiting argues class
treatment is precluded in this case because the claims would require an individual examination of
property interests of each proposed class member. Hystad contends the typicality requirements are
met because Hystad and the class members have the same claim for relief.
Hystad brings this class action pursuant to Rule 23(b)(3) of the Federal Rules of Civil
Procedure. Rule 23(a) sets forth the prerequisites to a class action. It provides:
(a) Prerequisites. One or more members of a class may sue or be sued as representative
parties on behalf of all members only if:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses
of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a).
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A district court may grant a motion to strike class allegations prior to the filing of a motion
for class certification when “it is apparent from the pleadings that the class cannot be certified
because unsupportable class allegations bring impertinent material into the pleading and permitting
such allegations to remain would prejudice the defendant by requiring the mounting of a defense
against claims that ultimately cannot be sustained.” Donelson v. Ameriprise Fin. Servs., Inc., 999
F.3d 1080 (8th Cir. 2021) (internal quotation marks omitted).
In Nudell v. Burlington N. and Santa Fe Ry. Co., 2002 WL 1543725 (D.N.D. July 11,
2002), the court determined the proposed class and subclass lacked typicality when considering a
motion for class certification. The court expressed concerns about the proposed class definitions:
Most fundamentally, it is difficult to understand how the Court could determine
whether a potential class member is in fact a class member without an
individualized inquiry. To the contrary, the current class definition would require
several factual determinations as to each potential class member. As a threshold
matter, each claimant would have to establish that he or she owned land described
in the definition … The essential questions here, as stated above, concern property
rights. Specifically, the case would require resolution of several property-related
issues: the extent of the railroads interest in the land at issue; the extent of each
property owners interest; whether the defendants activities regarding laying of fiber
optic cable exceeded the scope of the railroads interest vis-a-vis that of the class
members; whether any legal defenses exist to bar the claim of each class member,
such as consent, acquiescence, or the statute of limitations; and, finally, assuming
the claims are legitimate and proven, whether and how much damages are due. The
Court concludes that these decisions turn on so many individual questions that the
claims of the named plaintiffs are not typical of the class.
Nudell, 2002 WL 1543725, at *1-5 (D.N.D. July 11, 2002).
Hystad’s proposed class presents similar problems as the class and subclass in Nudell.
While Hystad’s proposed class concerns persons and entities owning mineral interests in wells,
rather than railroad interests, individual questions as to each class member remain. Examining
each proposed class member’s claim would require verification of the ownership interests and a
review of their lease with Whiting to determine whether the member holds the interest required to
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fall within N.D.C.C. § 47-16-39.1. Further, N.D.C.C. § 47-16-39.1 contains safe harbor provisions
which provide that penalty interest does not accrue under certain circumstances. Hystad’s proposed
class would require an inquiry into each member to determine whether any safe harbor provisions
apply. Additionally, if claims are legitimate and proven, damages must be separately calculated
for every class member. These necessary individualized determinations make Hystad’s claims
atypical of those of other class members. The Court finds that the proposed class does not meet
the Rule 23(a)(3) typicality requirement.
Beyond the typicality requirement in Rule 23(a)(3), the proposed class cannot satisfy the
predominance requirement of Rule 23(b)(3). Under Rule 23(b)(3) a class action may be maintained
if Rule 23(a) is satisfied and if “the court finds that the questions of law or fact common to class
members predominate over any questions affecting only individual members, and that a class
action is superior to other available methods for fairly and efficiently adjudicating the
controversy.” Fed. R. Civ. P. 23(b)(3).
In Ebert v. General Mills, 823 F.3d 472 (8th Cir. 2016) the Eighth Circuit Court of Appeals
addressed the predominance requirement of Rule 23(b)(3). “The requirement of predominance
under Rule 23(b)(3) is not satisfied if ‘individual questions ... overwhelm the questions common
to the class.’” Id. at 478-79 (citing to Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S.
455 (2013)). “An individual question is one where members of a proposed class will need to
present evidence that varies from member to member, while a common question is one where the
same evidence will suffice for each member to make a prima facie showing [or] the issue is
susceptible to generalized, class-wide proof.” Id. at 479 (internal quotation marks omitted). “The
predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant
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adjudication by representation and goes to the efficiency of a class action as an alternative to
individual suits.” Id. (citations omitted).
Here, the verification of leases and ownership interests and the determination of the
existence of safe harbor provisions are individual questions that would require each member of the
proposed class to present evidence. Hystad argues any issues can be promptly and conclusively
determined through discovery. However, an individual inquiry into every class member would be
time-consuming and inefficient. The individualized issues in this case predominate over the
common claim for relief by the proposed class. The proposed class lacks the cohesion necessary
to warrant class certification. Accordingly, the Court grants the Defendant’s motion to strike the
class allegations.
B. Motion to Dismiss Declaratory Judgment Claim
Whiting argues the Court lacks jurisdiction over Hystad’s declaratory judgment claim
because Hystad fails to present a case or controversy. Hystad asserts its claim for declaratory relief
is ripe because Whiting has consistently made late payments to Hystad without paying 18%
interest and the probability of Whiting making future late payments without paying 18% interest
is real and substantial.
The Declaratory Judgment Act authorizes federal courts to declare the rights of interested
parties “[i]n a case of actual controversy.” Diagnostic Unit Inmate Council v. Films Inc., 88 F.3d
651, 653 (8th Cir. 1996) (quoting 28 U.S.C. § 2201). The Declaratory Judgment Act does not
provide a means for standing or relief. Mitchell v. Dakota Cty. Soc. Servs., 959 F.3d 887, 897 n.
2 (8th Cir. 2020) (citing Carson v. Pierce, 719 F.2d 931, 933 (8th Cir. 1983)).
The requirement of an “actual controversy” is imposed by Article III of the Constitution.
Diagnostic Unit Inmate Council, 88 F.3d at 653. See also Steffel v. Thompson, 415 U.S. 452, 458
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(1974). The Eighth Circuit has recognized that “in general, an actual controversy is a substantial
controversy, between parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.” Diagnostic Unit Inmate Council, 88 F.3d at 653
(1996) (citations omitted). The plaintiff’s claims must be ripe to seek declaratory judgment.
Acuity, 2007 WL 1356919, at *5 (2007). The ripeness doctrine requires that “before a federal court
may address itself to a question, there must exist a real substantial controversy between parties
having adverse legal interests, a dispute definite and concrete, not hypothetical or abstract.” Id.
(quoting Nebraska Public Power District v. MidAmerican Energy Co., 234 F .3d 1032, 1038 (8th
Cir.2000)). “Because the test to determine the existence of a substantial controversy is imprecise,
the decision of whether such controversy exists is made upon the facts on a case by case basis.”
Modern Equip. Co., 146 F. Supp. 2d at 990 (internal citations omitted). A claim is not ripe for
adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed
may not occur at all. Texas v. United States, 523 U.S. 296, 300 (1998) (internal quotation marks
omitted).
Hystad’s declaratory judgment claim lacks a definite and concrete dispute. The claim is
predicated on future contingencies. Hystad’s claim assumes: 1) Whiting will fail to pay future
royalties within 150 days of production and marketing; 2) Whiting will not tender 18% interest
when it pays the late royalties; and 3) no justification will exist for Whiting’s failure to pay, such
as the statutory safe harbor provisions. Hystad’s claim rests upon these future contingencies that
may not occur as anticipated or at all which makes the claim hypothetical rather than concrete.
Hystad argues the declaratory judgment claim is viable because it requests the Court
determine whether Whiting is statutorily required to pay 18% interest when it makes future late
payments, which is a purely legal issue. However, whether Hystad is entitled to 18% interest
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necessitates a factual inquiry into whether any circumstances occurred that make the safe harbor
provision of the statute applicable. Accordingly, Hystad’s declaratory judgment claim fails to
present an actual controversy and is not ripe for adjudication. Dismissal of Hystad’s declaratory
judgment claim is warranted.
C. Motion to Dismiss Claim for Statutory Interest
1. Bankruptcy Orders
Whiting argues the confirmation order in the bankruptcy proceedings discharged all
prepetition claims for penalty statutory interest against Whiting which includes the putative class’s
claim. Finding the class allegations must be stricken, the Court need not address whether the class’s
claim for statutory interest was discharged by prior bankruptcy orders.
2. Statute of Limitations
Whiting argues the putative class’s claim for 18% statutory interest on untimely payments
falls outside the applicable statute of limitations period. The first amended complaint asserts the
applicable statute of limitations for claims under N.D.C.C. § 47-16-39.1 is six years. Whiting
argues a three-year statute of limitations applies to the proposed class’s claim.
Hystad initiated this action on August 24, 2022. The first amended complaint asserts claims
for class members that date back to August 12, 2016, while Hystad’s claims only date back to June
4, 2021. Whiting’s argument regarding the statute of limitations only pertains to the class’s claim.
Hystad’s claim for statutory interest arose approximately fourteen months prior to the initiation of
this action. Thus, Hystad’s claim is not barred by either the three-year or six-year statute of
limitations. The Court need not address which statute of limitations period applies to the class’s
claim because the class allegations have been struck. Hystad’s claim for statutory interest may
proceed.
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D. Motion for Leave to File Second Amended Class Action Complaint
Rule 15(a)(2) provides that the Court may permit a party to amend the pleadings when
justice so requires. It is generally left to the court’s discretion whether to grant leave to file an
amended pleading. Gamma-10 Plastics, Inc. v. Am. President Lines, Ltd., 32 F.3d 1244, 1255 (8th
Cir. 1994); Williams v. Little Rock Mun. Water Works, 21 F.3d 218, 224 (8th Cir. 1994); Brown
v. Wallace, 957 F.2d 564, 566 (8th Cir. 1992). “Unless there is a good reason for denial, ‘such as
undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the non-moving party, or futility of the amendment, leave
to amend should be granted.’” Becker v. Univ. of Neb. at Omaha, 191 F.3d 904, 907-08 (8th Cir.
1999) (original citation omitted). Fed. R. Civ. P. 15(a).
Rule 15(a) of the Federal Rules of Civil Procedure provides as follows:
(a) Amendments Before Trial.
(1) Amending as a Matter of Course. A party may amend its pleading once as
a matter of course within:
(A) 21 days after serving it, or
(B) if the pleading is one to which a responsive pleading is required, 21 days
after service of a responsive pleading or 21 days after service of a motion
under Rule 12(b), (e), or (f), whichever is earlier.
(2) Other Amendments. In all other cases, a party may amend its pleading only
with the opposing party’s written consent or the court’s leave. The court should
freely give leave when justice so requires.
Fed. R. Civ. P. 15(a).
Unless there is a good reason for denial, such as undue delay, bad faith, or dilatory motive,
repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the
non-moving party, or futility of the amendment, leave to amend is generally granted. Becker v.
Univ. of Nebraska at Omaha, 191 F.3d 904, 908 (8th Cir. 1999); Brown v. Wallace, 957 F.2d 564,
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566. “Likelihood of success on the new claim or defenses is not a consideration for denying leave
to amend unless the claim is clearly frivolous.” Becker v. Univ. of Nebraska at Omaha, 191 F.3d
904, 908.
Hystad seeks to amend its complaint to shorten the time-period in which it seeks to recover
statutory interest on untimely payments. Hystad seeks statutory interest on untimely payments
made to class members since August 12, 2016, in the first amended complaint, whereas Hystad
seeks statutory interest on untimely payments made to class members since September 1, 2020, in
the proposed second amended complaint. Hystad itself seeks statutory interest on untimely
payments since June 4, 2021, in both the first amended complaint and the proposed second
amended complaint.
The proposed amendments address only the class members. Specifically, shortening the
time period in which Hystad seeks recovery for the proposed class removes alleged claims that
have potentially been discharged by bankruptcy proceedings. However, the date the class’s claim
arose does not matter because the class allegations must be struck. Thus, Hystad’s proposed
amendments would be futile. Accordingly, the Plaintiff’s motion for leave to file a second
amended complaint is denied.
IV. CONCLUSION
The Court has carefully reviewed the entire record, the parties’ briefs, and the relevant case
law. For the reasons set forth above, the Defendant’s motion to strike class allegations (Doc. No.
11) is GRANTED. The Defendant’s motion to dismiss the Plaintiff’s declaratory judgment claim
(Doc. No. 11) is GRANTED. The Plaintiff’s claim for Whiting’s violations of N.D.C.C. § 47-16-
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39.1 since June 4, 2021, will go forward only as to Hystad. The Plaintiff’s Motion for Leave to
File Second Amended Class Action Complaint (Doc. No. 17) is DENIED.
IT IS SO ORDERED.
Dated this 15th day of May, 2023.
/s/ Daniel L. Hovland
Daniel L. Hovland, District Judge
United States District Court
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