[00:00:04] Speaker 00:
We have five cases on the calendar this morning.

[00:00:07] Speaker 00:
Three patent cases, two from the district courts and one from the patent office.

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We have a case from the Court of Federal Claims and one from the veterans court.

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The latter and one of the patent cases are being submitted on the briefs and will not be argued.

[00:00:26] Speaker 00:
The first case is KC Resources versus the United States.

[00:00:32] Speaker 00:
Mr. Tanner.

[00:00:35] Speaker 00:
Good morning, Your Honors.

[00:00:43] Speaker 02:
May it please the Court, my name is Jack Tanner.

[00:00:45] Speaker 02:
I'm with Fairfield and Woods in Denver, Colorado.

[00:00:48] Speaker 02:
We are here today on the appeal of an order dismissing my client's claim for a wrongful taking, a claim for breach of contract, and the contemporaneous denial of a motion to amend

[00:01:01] Speaker 02:
to bring in as an involuntary plaintiff a party to the contract to get around a privity problem.

[00:01:09] Speaker 02:
How would that get around the privity problem?

[00:01:12] Speaker 02:
As we understand the law, Your Honor, we can, as under the Devonshire case, we can bring in BP as an involuntary plaintiff, and BP is in privity with the government.

[00:01:25] Speaker 01:
I'm not sure that that solves your privity problem.

[00:01:28] Speaker 01:
Certainly BP is in privity with the government.

[00:01:31] Speaker 01:
But I don't know why bringing them in solves your privity problem.

[00:01:36] Speaker 02:
That's my reading of the Devonshire case, Your Honor, is that's exactly what the subcontractor did.

[00:01:41] Speaker 02:
It's brought in the contractor as an involuntary plaintiff.

[00:01:44] Speaker 02:
That case was allowed to proceed.

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And I would note, Your Honor, that the trial judge in his original order specifically said that he would typically grant the motion to amend and allow that to

[00:01:59] Speaker 02:
happened to bring in BP as an involuntary plaintiff to get around the privity problem.

[00:02:03] Speaker 02:
And the only reason he did not do so, he's expressly found in the original order, was it would be futile because of this document, which unfortunately has become the center of the case regarding the takings part of the case.

[00:02:17] Speaker 02:
What is the Devonshire case?

[00:02:20] Speaker 01:
I don't see that cited in your brief.

[00:02:22] Speaker 03:
Devin energy.

[00:02:24] Speaker 03:
Don't you Devin energy?

[00:02:25] Speaker 01:
Oh, I apologize.

[00:02:26] Speaker 03:
Yes.

[00:02:26] Speaker 03:
I think you mean the court of federal claims case, not a federal circuit case called Devin energy.

[00:02:31] Speaker 01:
Yes, your honor.

[00:02:31] Speaker 01:
I apologize.

[00:02:33] Speaker 01:
I apologize.

[00:02:34] Speaker 01:
So there's no authority from our court.

[00:02:36] Speaker 01:
That is correct.

[00:02:39] Speaker 01:
That is correct.

[00:02:42] Speaker 02:
But I think the legal analysis is the same in my view.

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And I would find that authority persuasive.

[00:02:47] Speaker 03:
But this particular judge didn't, right?

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Because this particular judge concluded that at the time of plugging, KCR was nothing more than a disinterested third party.

[00:02:58] Speaker 02:
What's very interesting to me about this case is the judge was so very clear in his original order.

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He specifically said, and it's cited in our brief NNR reply in this court, he specifically said, I'm not allowing you to amend because it would be futile.

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And the reason it would be futile.

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is because of this document that BP filed with the Colorado Oil and Gas Conservation Commission, which in other proceedings, BLM said is not binding on us and that was found persuasive.

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The rabbit we're all chasing is this outlier document where without our knowledge, my client was the operator at the time, without my client's knowledge, the immediate lessee filed this

[00:03:40] Speaker 02:
paper with the Colorado Oil and Gas Commission said, we're now the operator, and they plugged the well two weeks later.

[00:03:45] Speaker 01:
Let's suppose for the moment that you're, hypothetically, that you're correct, that you were the operator.

[00:03:52] Speaker 01:
The notice that you received in January of 2008 said, you have to plug the well, and if you disagree with this notice, you have a right of appeal.

[00:04:09] Speaker 01:
appeal, right?

[00:04:11] Speaker 01:
The client did not appeal.

[00:04:12] Speaker 01:
That is correct, Your Honor.

[00:04:13] Speaker 01:
Well, what was wrong with the appeal remedy that you had?

[00:04:17] Speaker 01:
As I understand it, under the regulations, you have a right of appeal administratively, then you can go to district court and then go to the court of appeals to challenge this, right?

[00:04:26] Speaker 02:
My client... Is that correct?

[00:04:27] Speaker 02:
Yes, Your Honor.

[00:04:28] Speaker 02:
That is correct.

[00:04:29] Speaker 02:
My client had the right of appeal for reasons that I'm not sure I know, and if I know, I probably couldn't tell you the client did not timely appeal.

[00:04:36] Speaker 01:
Why doesn't that foreclose a takings claim under the line of cases?

[00:04:42] Speaker 01:
Are you familiar with lion raisins?

[00:04:44] Speaker 01:
No, I am.

[00:04:45] Speaker 02:
But I would say, I think that's the argument that we should be able to make on the merits to the trial court is that we are not foreclosed under these particular circumstances.

[00:05:01] Speaker 02:
Given the fact that what happened later was

[00:05:05] Speaker 01:
Why shouldn't you be foreclosed for failure to take the appeal to challenge this?

[00:05:10] Speaker 02:
The appeal became moot because the well itself was plugged, which we didn't know about at the time.

[00:05:17] Speaker 02:
When did that happen?

[00:05:21] Speaker 02:
It's in the pleadings.

[00:05:22] Speaker 02:
It's December.

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While we were still, I mean, it was outside the immediate appeal period.

[00:05:27] Speaker 02:
That is true.

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We did later file an appeal, which was dismissed as untimely.

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While that was in process, we found out the well had already been plugged and the whole appeal became moot because the well was plugged.

[00:05:39] Speaker 01:
So why isn't a timely appeal an adequate remedy?

[00:05:43] Speaker 02:
Because the well was plugged outside.

[00:05:46] Speaker 02:
The well wasn't plugged by us.

[00:05:48] Speaker 02:
We never plugged the well.

[00:05:49] Speaker 01:
I don't understand what that has to do with it.

[00:05:53] Speaker 01:
In order to plug the well, you had an opportunity to challenge that.

[00:05:57] Speaker 01:
Your client, for whatever reason, decided not to do that.

[00:06:02] Speaker 01:
timely challenge the plugging of the well, you would have been able to say, well, the well is producing, you shouldn't be plugging it, correct?

[00:06:09] Speaker 02:
Maybe.

[00:06:11] Speaker 02:
I hope so.

[00:06:12] Speaker 02:
I mean, the argument was that the reason the client was a bit flummoxed, I will say this, because the well was producing at the time.

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And the letter that was sent said, these are the things you have to do, either get the well producing or you agree to plug it.

[00:06:27] Speaker 02:
But because the well was already producing... Or object to the order.

[00:06:30] Speaker 01:
That's exactly what you were supposed to do was to say, you're wrong, the well is producing, please rescind this order.

[00:06:39] Speaker 02:
At some point the client did that, it was determined procedurally improper.

[00:06:43] Speaker 02:
Because it was late.

[00:06:44] Speaker 02:
Yes, Your Honor, that's correct.

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And while we were still arguing about that, we found out the well was already plugged and abandoned.

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So I think under these circumstances, and the reason I keep going back to that, Your Honor, is it sort of mooted the

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appeal process.

[00:07:01] Speaker 01:
I mean, the result was probably... The appeal process didn't work because you didn't avail yourself of it in a timely way.

[00:07:08] Speaker 01:
I don't understand how that can lead to a takings claim.

[00:07:13] Speaker 02:
Your Honor, I think under the unusual facts we have here where a third party took action which mooted our appeal.

[00:07:20] Speaker 02:
There was no timely appeal.

[00:07:22] Speaker 02:
That's correct.

[00:07:23] Speaker 02:
There was not a timely appeal.

[00:07:25] Speaker 02:
That is correct, Your Honor.

[00:07:29] Speaker 00:
Next point.

[00:07:31] Speaker 02:
Thank you.

[00:07:35] Speaker 02:
Going back to a point you had made, Judge Moore, that the trial court here specifically said, I would allow you to amend on the contractual argument except for you made this admission in a parallel proceeding that you were not the operator.

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And so as a result of that, I'm not going to waste everybody's time.

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And we're going to go ahead and dismiss the case now.

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And I'm not going to allow you to amend.

[00:07:57] Speaker 02:
What was interesting is we filed the motion to reconsider the motion in Rule 59, specifically pointing out the trial judge.

[00:08:03] Speaker 02:
You relied on this evidence incorrectly.

[00:08:05] Speaker 02:
That's not what the evidence showed.

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And in his order denying the motion to reconsider, he never addressed the futility argument on the motion to amend for the privity problem.

[00:08:16] Speaker 02:
The judge specifically, well, he didn't address it.

[00:08:20] Speaker 02:
In his original order, he specifically said, I'm not going to let you amend, and here's why.

[00:08:23] Speaker 02:
We showed that was incorrect.

[00:08:26] Speaker 02:
He then just ignored that in the second order, the denial of 59.

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He never addresses the amendment or the futility issue.

[00:08:33] Speaker 02:
So in answer to your question, Judge Moore, I don't think that's why he found he wouldn't let us amend.

[00:08:39] Speaker 02:
It was because of lack of authority.

[00:08:42] Speaker 02:
He said it's because it's futile because of this one document, which as we have shown is, I don't believe, determinative at all of the issues in the case.

[00:08:55] Speaker 02:
The question on standing, going back to the original rule 12 B1 motion, we have attached to our complaint and the claim itself, we alleged we were the operator, we attached documents showing we were treated as the operator by BLM.

[00:09:09] Speaker 02:
The court should not at this stage resolve a factual dispute as to whether we're the operator for purposes of a motion under rule 12.

[00:09:17] Speaker 02:
Our allegations are to be given some leeway and we should be considered the operator.

[00:09:22] Speaker 01:
And based on that... If we conclude that the denial of the motion for leave to amend was proper because the amendment would be futile anyway, that adding BP doesn't solve your privity problem, we can affirm on that ground, right?

[00:09:37] Speaker 02:
You could affirm the, I believe, the breach of contract claim on that ground.

[00:09:41] Speaker 02:
I don't know that that would get around the takings problem.

[00:09:43] Speaker 02:
But that would, yes, if you said bringing in BP as involuntary plaintiff does not solve

[00:09:49] Speaker 02:
KC resources privity problem than that you could have formed on that ground, yes.

[00:09:54] Speaker 02:
I don't think you should, obviously, because I think here we've got some very unusual facts that you don't often see where you've got a party to a contract which is acting pursuant to a direction of the United States government to take action it shouldn't be doing, which is plugging our well while it's operating.

[00:10:17] Speaker 02:
That's sort of the root of the problem in my view.

[00:10:21] Speaker 02:
And so I would ask that you reverse the order of dismissal and remands allow us to amend and we can get to the merits of the case.

[00:10:30] Speaker 02:
I'd save my remaining time for rebuttal.

[00:10:32] Speaker 02:
There are no other questions now.

[00:10:33] Speaker 00:
We will save it for you, Mr. Tanner.

[00:10:35] Speaker 00:
Thank you.

[00:10:36] Speaker 00:
Ms.

[00:10:36] Speaker 00:
Lynch.

[00:10:40] Speaker 04:
Good morning, Your Honors.

[00:10:41] Speaker 04:
May it please the court?

[00:10:42] Speaker 04:
We respectfully request that this court affirm the decision of the United States Court of Federal Claims dismissing Casey Resources' complaint for lack of jurisdiction.

[00:10:51] Speaker 04:
Casey Resources cannot demonstrate that it possessed a legally cognizable property interest at the time these wells were plugged.

[00:10:59] Speaker 01:
The evidence is in... Suppose we disagree and we think that there's a fact issue as to whether they were the operator.

[00:11:07] Speaker 01:
Can we affirm the contract claim on the ground of

[00:11:11] Speaker 01:
lack of privity, in other words, that adding BP would solve the privity problem?

[00:11:17] Speaker 04:
Well, Your Honor, respectfully, we do not believe that the addition of BP to this case would solve the privity problem.

[00:11:25] Speaker 04:
We do not believe that that Devon case is necessarily correctly decided.

[00:11:28] Speaker 03:
There is no... As I said, his premise was suppose we find Casey is

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an operator, is the operator who had the operating rights at the time.

[00:11:41] Speaker 03:
That was his hypothetical.

[00:11:42] Speaker 03:
Oh, OK.

[00:11:43] Speaker 03:
As I understood it.

[00:11:44] Speaker 03:
So if that was true, then what?

[00:11:47] Speaker 04:
If that were true, then there could be a question of fact that would require remand to the court.

[00:11:54] Speaker 01:
Well, but my question is, since your position is that adding BP wouldn't solve the lack of privity problem, can we affirm on that alternative grant?

[00:12:08] Speaker 01:
Adding BP would not solve the privity problem, but if... Well, there's no point in allowing the amendment if adding BP wouldn't solve the privity problem.

[00:12:17] Speaker 01:
That's correct, Your Honor.

[00:12:17] Speaker 04:
That's correct.

[00:12:18] Speaker 04:
The amendment would be futile in this case.

[00:12:22] Speaker 04:
In addition, because the only evidence that has been produced so far is the evidence from BP terminating Casey Resources operator status as of September 1st, 2009.

[00:12:32] Speaker 04:
There's been nothing presented in any of these proceedings below.

[00:12:36] Speaker 04:
And it is Casey Reavers' burden to demonstrate jurisdiction in the Court of Federal Claims.

[00:12:41] Speaker 04:
And Casey Reavers has never presented anything to refute the BP's notices that it provided to the Colorado Oil and Gas Commission terminating Casey Reavers' operator status effective September 1st, 2009.

[00:12:54] Speaker 03:
Does the BP have the authority to make that termination?

[00:12:59] Speaker 04:
Yes, BP does have that authority under BLM's regulations at 43 CFR 3100.0-5E.

[00:13:07] Speaker 03:
But isn't that, I'm definitely not familiar with all of BLM's regulations, but isn't it true that BP only has that authority if they submit their request to terminate

[00:13:22] Speaker 03:
Casey's operator license to the Bureau and get its approval to do so, and only then do they revert to operator status?

[00:13:31] Speaker 04:
No.

[00:13:31] Speaker 04:
There was no requirement at the time that this termination occurred for BLM to approve any of those change in operator status.

[00:13:39] Speaker 04:
In fact, the BLM's regulations specifically state that the arrangements between the lessee and any sub-lessees are left to the parties, and BLM is not a party to those actions.

[00:13:50] Speaker 00:
Did KC indicate in writing that it was an operator?

[00:13:55] Speaker 04:
Originally it did, yes, your honor.

[00:13:57] Speaker 04:
And there is a difference between operator for purposes of BLM's regulations and an operating rights owner.

[00:14:03] Speaker 04:
And that really is the crux of this problem.

[00:14:07] Speaker 04:
If you look at BLM's regulations at 43 CFR 3160.0-5Q, it defines an operator as any person or entity

[00:14:19] Speaker 04:
including but not limited to the lessee or the operating rights owner who has stated in writing to the authorized officer that it is responsible.

[00:14:29] Speaker 04:
Um, and so in this case, KB resources is the only party.

[00:14:33] Speaker 04:
Okay.

[00:14:33] Speaker 04:
Let's back up for a sec.

[00:14:34] Speaker 03:
I think, I think I may have been confused.

[00:14:38] Speaker 03:
I said, doesn't BLM have a reg that requires approval, but wasn't the reg my law clerk has texted me and indicated, no, it was the lease itself, the lease the government had with BP.

[00:14:49] Speaker 03:
expressly has a provision that states any transfer of operators effective only after approval of the director of BLM.

[00:14:57] Speaker 03:
Is that incorrect?

[00:14:59] Speaker 03:
No, Your Honor.

[00:15:01] Speaker 03:
Is that correct?

[00:15:01] Speaker 03:
That is correct.

[00:15:02] Speaker 03:
So the lease itself, the very contract, the government institute with BP says that the government will not consider anyone to be the operator until such

[00:15:16] Speaker 03:
transfer has been submitted and approved to the director of BLM.

[00:15:20] Speaker 04:
And that's precisely because of the situation that we have here, because we have... So wait, but the... Just let me transfer some facts.

[00:15:26] Speaker 03:
So we had a transfer from BP to KCR that was properly submitted to BLM and they approved, correct?

[00:15:35] Speaker 03:
That was the original transfer of operator rights.

[00:15:38] Speaker 03:
That all happened.

[00:15:38] Speaker 04:
It may not have been BP at the time as the lessee, but yes, KC Resources did have operator status.

[00:15:45] Speaker 03:
And then we have a letter that BP sent to the Colorado Commission saying, we're taking back over these rights.

[00:15:53] Speaker 03:
What we don't have pursuant to this contract is actually them achieving operator status because they didn't pursuant to the lease get

[00:16:06] Speaker 03:
re-approved as the new operator by virtue of an approval from the director of BLM.

[00:16:12] Speaker 04:
But that is where the regulations come in and indicate that any of those transactions do not require that type of approval.

[00:16:21] Speaker 03:
You're telling me the regulations can trump the contract that these two parties established.

[00:16:29] Speaker 03:
The government, don't you think it's important that the government by contract can put into place into a contract term?

[00:16:36] Speaker 03:
so that it is always clear who it is dealing with and that it will only deal with an operator that it has approved of.

[00:16:44] Speaker 03:
I mean, I'm very nervous about what you just said because I think it would really screw the government to be honest.

[00:16:48] Speaker 03:
Yes, Your Honor.

[00:16:48] Speaker 03:
I think the government has a right to demand by contract that you can only transfer a lease or any portion of a lease, the operator rights, if we approve of the person to whom you're transferring it.

[00:17:01] Speaker 03:
And I don't think you would disagree with that, right?

[00:17:03] Speaker 03:
The government has the right

[00:17:05] Speaker 03:
And you would see why it would benefit them to have that in the contract.

[00:17:08] Speaker 04:
Yes, Your Honor.

[00:17:08] Speaker 04:
And in this instance, what occurred here was the government was attempting to contact KC Resources to indicate whether or not these wells were producing and paying quantities.

[00:17:20] Speaker 04:
KC Resources ignored those various notices.

[00:17:23] Speaker 01:
Right.

[00:17:24] Speaker 01:
That may be true, but that's a different point.

[00:17:26] Speaker 01:
I mean, they certainly were the operator at the time they received those notices.

[00:17:31] Speaker 04:
That is correct, Your Honor.

[00:17:32] Speaker 01:
So I'm not sure exactly what the takings claim here is, whether it's the plugging of the wells or the order to plug the wells.

[00:17:42] Speaker 01:
But let's get back to the question we were exploring earlier, and that is whether their takings claim is barred because they didn't avail themselves of the administrative remedy that they had.

[00:17:54] Speaker 04:
Yes, Your Honor.

[00:17:56] Speaker 04:
That is our alternative basis for dismissing this case because

[00:18:00] Speaker 04:
as this is essentially a collateral attack by KC resources on that original plug-in abandon notice.

[00:18:07] Speaker 04:
And so that collateral attack should not be permitted in the Court of Federal Claims as a takings case, because they're basically challenging the authorized action of this.

[00:18:19] Speaker 04:
They're not permitting, they're not admitting that it's an authorized action.

[00:18:22] Speaker 04:
So that should be dismissed, it could be affirmed as an alternative ground under 12.6 for failure to state a claim.

[00:18:30] Speaker 03:
affirm a dismissal for lack of standing under an alternative 12b6 ground?

[00:18:36] Speaker 03:
Is that what you're saying?

[00:18:38] Speaker 04:
We argued in the alternative below, so the dismissal could be affirmed under that ground as well.

[00:18:50] Speaker 04:
As I noted earlier, we don't concede that the Devon case was correctly decided.

[00:18:54] Speaker 04:
The addition of BP would not cure the privy problem.

[00:18:59] Speaker 04:
For these reasons and the reasons outlined in our brief, we respectfully request that this court affirm the decision of the Court of Federal Claims.

[00:19:09] Speaker 00:
Thank you, Ms.

[00:19:10] Speaker 00:
Lynch.

[00:19:12] Speaker 00:
Mr. Tanner has some rebuttal comments.

[00:19:15] Speaker 02:
Just briefly, Your Honor.

[00:19:16] Speaker 02:
One is, I do take a step back and wonder why we're arguing about the significance of evidence.

[00:19:22] Speaker 02:
Again, this is a motion to dismiss, and this is an appeal from a motion to dismiss.

[00:19:27] Speaker 02:
And when we start arguing the significance of evidence, I think we've gone astray.

[00:19:31] Speaker 02:
We've alleged in the complaint we were the operator, and we attached documents to the complaint showing we were the operator at the time.

[00:19:40] Speaker 02:
And I think that should be enough to survive this 12b1 attack.

[00:19:46] Speaker 02:
I do disagree with Mr. Lynch about saying we've not alleged the action was authorized.

[00:19:50] Speaker 02:
That's an argument

[00:19:52] Speaker 02:
that was made in response, and I thought we cleared up in our reply.

[00:19:54] Speaker 02:
We admit these actions were authorized, and that's what resulted in the, we believe, wrongful taking of our property.

[00:20:02] Speaker 02:
Thank you.

[00:20:03] Speaker 00:
Thank you, Mr. Tanner.

[00:20:04] Speaker 00:
We'll take the case on revisement.