Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-84-02656/USCOURTS-ca10-84-02656-0/pdf.json

Parties Involved:
Mack Oil Company
Appellee
Donald C. Slawson
Appellant

Document Text:

IN THE UNITED STATES COURT OF APPEALS F I L L .D 

United States Court <?f AppealP FOR THE TENTH CIRCUIT Tenth Circuit 

DONALD C. SLAWSON, 

Plaintiff-Appellant, 

DEC 31 1992 

ROBERT L. HOECKER 

Clerk 

v . 

MACK OIL COMPANY, 

Defendant-Appellee. 

No. 84-2656 

(D. C. No. 84-1282-W) 

(W . D. Okla. ) 

ORDER AND JUDGMENT* 

Before ANDERSON and HOLLOWAY, Circuit Judges, and CHILSON,** 

District Judge. 

In May 1984, Plaintiff-Appellant Donald C. Slawson filed this 

suit in the Western District of Oklahoma seeking to quiet title to 

his claimed interest in an oil and gas well and to obtain an 

accounting of the production from the well. The district judge 

dismissed Slawson's complaint for lack of subject matter 

jurisdiction, and this appeal followed. The panel abated 

Slawson's appeal because of ongoing state proceedings related to 

* This order and judgment has no precedential value and shal l not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judic ata, or collateral estoppel. 10th Cir. R. 36.3. 

** The Honorable Hatfiel d Chilson of the United States District 

Court for the District of Colorado, sitting by designation, heard 

argument of this appeal but passed away during its abatement and 

did not participate in this decision. 

Appellate Case: 84-2656 Document: 010110155950 Date Filed: 12/31/1992 Page: 1 
his claims. Before us i s a pending motion that Sl awson filed 

seeking to have the case remanded t o the district court . We 

vacate our order of abatement, deny Slawson's motion to remand , 

reverse the district court's dismissal o f the a cti on, and remand 

for proceedings in acco rd with this opinion. 

I 

In 1980 the Oklahoma Corporation Commission (the Commission 

or the OCC) issued Order No. 163830 (the Spacing Order) 

establishing, inter alia, a 640-acre drilling and spacing u nit f o r 

the Deep Morrow and Deep Springer formations as well as other 

separate common s ources of supply underlying Section 9 , 3 North, 5 

West, in Grady County, Oklahoma . Slawson owned mineral interests 

in Section 9 and on the basis of the Spacing Order, Slawson 

applied to the OCC in October 1982 for an o rder adjudicating the 

rights and equities and pooling the mineral interests in the 

640-acre unit comprising Section 9. 

In February 1983, while Slawson's application for a pooling 

order was pending, Bunker Exploration Co., not a party here, 

applied to the Commission to divide the 640-acre unit in Section 9 

into four, 160-acre units. Before ruling on Bunker Exploration's 

despacing application, the Commission in June 1983 entered Order 

No. 240777 (the Pooling Order), pooling the interests of the oil 

and gas owners in the 640-acre unit and designating Mack Oil as 

the operator of the unit well . Slawson timely elected to 

participate in the proposed unit well, which was to be drilled in 

the center of the southwest quarter of the southwest quarter of 

Section 9. Mack Oil then began drilling the unit well , known as 

2 

Appellate Case: 84-2656 Document: 010110155950 Date Filed: 12/31/1992 Page: 2 
the Crabb No. 1-9, which when completed in June 1984 "proved to be 

a most prolific oil well." Conoco . Inc . v . Corporation 

Commission, No . 72 , 360, slip op. at 3 (Okla . Ct . App. Mar. 12, 

19 91) . 

In January 1984 the Commission granted the Bunker Exploration 

application to despace the 640-acre unit in Section 9. By Order 

No. 251335 (the Despacing Order), the Commission created four, 

160-acre units in Section 9, thus amending the earlier Spacing 

Order. Slawson appealed the Despacing Order to the Oklahoma 

Supreme Court. In August 1984, by Order No. 264533 (the Repooling 

Order), the Commission granted Mack Oil's application to repool 

the interests of the oil and gas owners in the southwest quarter 

of Section 9. Slawson also appealed this order . 

The Oklahoma Court of Appeals eventually vacated both the 

Despacing and Repooling Orders in decisions that became final when 

the Oklahoma Supreme Court denied review. The Oklahoma Court of 

Appeals also vacated a subsequent despacing order by the 

Commission, Order No. 333152, that again established a 160-acre 

unit in Section 9; the Oklahoma Supreme Court again denied 

certiorari. 

appeals to 

Thus , following 

the courts, the 

a series of agency proceedings and 

Commission orders establishing a 

640-acre unit in Section 9 and pooling the rights of the oil and 

gas owners in the 640-acre unit remain in effect. 

II 

Slawson filed this diversity action in May 1984, shortly 

after the effective date of the Despacing Order that reduced the 

size of the unit to 160 acres. Slawson generally contends that 

3 

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his share of the production of the Crabb well should be based upon 

his interest in the larger 640-acre unit created by the Spacing 

and Pooling Orders, as opposed to his interest in the smaller 

160 -acre unit established by the subsequent Despacing and 

Repooling orders. Slawson thus claims his share of the production 

from the Crabb well is 15.06184 percent, which was the percentage 

of his interest in the 640-acre unit. See I R. at 4-5 

(complaint) . Slawson notes that his interest in the southwest 

quarter of Section 9, in which the Despacing Order established the 

smaller 160-acre unit, is just 0.83190 percent. Opening Br. of 

Appellant at 3. 

Slawson contends that Mack Oil has refused to recognize that 

he owns a 15 . 0 6184 percent working interest in the unit well, 

which constitutes a cloud on the title to his oil and gas 

leasehold interests in Section 9. I R. at 5 . Accordingly, 

Slawson's federal suit seeks (1 ) to quiet title to his claimed 

interest of 15.06184 percent in the Crabb well and (2 ) to obtain 

an accounting for his claimed 15.06184 percent of the production 

from the well. 

In June 1984, Mack Oil moved to dismiss this federal suit for 

lack of subject matter jurisdiction, or in the alternative to stay 

the litigation pending the outcome of related state proceedings. 

By an order filed on September 20, 1984, the district judge 

granted Mack Oil's motion to dismiss on the ground that Slawson's 

claim was within the exclusive jurisdiction of the Commission. 

IR. at 99. The judge analyzed the case under Tenneco Oil Co. v . 

El Paso Natural Gas Co., 687 P.2d 1049 (Okla. 1984 ) , which he read 

4 

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as indicating that whether courts or the Commission have 

jurisdiction over an issue "depends on whether private or public 

rights are at issue." IR. at 97. The judge reasoned that 

modification of a spacing order was within the Commission's 

"public function," and thus a dispute "which depends on whether 

modification of a spacing order was necessary or appropriate lies 

within the exclusive jurisdiction of the Commission." Id. at 99. 

Slawson's appeal followed. 

III 

Before we reach the merits of Slawson's appeal, we address 

our order abating this appeal, which has been in effect since oral 

argument in June of 1986. We abated Slawson's appeal noting 

ongoing state proceedings involving the Repealing Order. 1 Slawson 

has pending before us a motion to remand the action to the 

district court, which would also suggest that we lift the 

abatement . 

Slawson previously filed a motion to remand, which we denied 

in January 1989. At the time the state proceedings for which we 

had initially abated the appeal were complete2 but further related 

1 

In the order of abatement we cited two ongoing state 

proceedings, Mack Oil's application to the Commission for 

repooling (No. CD- 109928) and related appeals to the Oklahoma 

Supreme Court that were consolidated as No. 62,977. 

Prior to oral argument the Oklahoma Court of Appeals had 

vacated the OCC's Despacing Order. Conoco. Inc. v. Oklahoma 

Corporation Commission, No. 61,720, slip op. at 9 (Okla. Ct. App. 

Feb. 12, 1985). The intermediate appellate court's decision 

became final when the Oklahoma Supreme Court denied certiorari and 

the mandate issued on November 7, 1985. 

2 

By a letter in November 1988 Slawson notified us of the 

(Footnote continued on next page) 

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state proceedings were ongoing involving the second despacing 

order. In addition, Mack Oil notified us that in May 1988 it had 

initiated a related interpleader action, Mack Oil Co. v. Wisley. 

No. C-88-211L (Dist. Ct. Stephens County, Okla. filed May 9, 

1988 ) , in the District Court of Stephens County, Oklahoma. Mack 

Oil pointed out that in the state action it had sought to 

interplead the proceeds representing production from the Crabb 

well from the date of the first production until November 7, 1985, 

which was the date the mandate issued following the opinion 

vacating the Despacing Order. Brief in Response to Appellant's 

Mot. to Remand at 3. 3 Mack Oil argued that Slawson had raised the 

same issues in the federal action as are presented in .the state 

court suit in Stephens County, and that a remand would result in 

unnecessary litigation expenses. We ordered the parties to notify 

us of the status of (1) the state interpleader action in 

(Footnote continued): 

status of the ongoing state proceedings and asked us to remand the 

case to the district court "for further proceedings on the 

merits." Slawson noted that the appeals of the Repooling Order, 

which we had cited in the order of abatement, had been completed. 

The Oklahoma Court of Appeals vacated the OCC's Repooling Order. 

Conoco. Inc . v. Corporation Commission, No. 62,977, slip op. at 4 

(Okla. Ct. App. June 16, 1987). The Oklahoma Supreme Court denied 

certiorari. 

3 

In October 1991 the state district judge entered judgment in 

favor of Slawson and other mineral interest owners who sought 

title to the proceeds from the Crabb well on the basis of 640-acre 

spacing and pooling. Mack Oil Co. v. Wisley , No . C-88-211L (Dist . 

Ct. Stephens County, Okla. Oct. 1, 1991) (journal entry of 

judgment). 

The state district judge ordered Mack Oil Co . "to account for 

and pay to [the mineral interest owners] all unpaid proceeds" from 

the Crabb well . Journal Entry of Judgment at 9 . Subsequently 

Mack Oil filed an accounting with the state court. Slawson's 

Seventh Status Report at 2. 

6 

Appellate Case: 84-2656 Document: 010110155950 Date Filed: 12/31/1992 Page: 6 
No. C-88-211L, and (2 ) the litigation of Order No. 333152, which 

was the second despacing order. 

On May 4, 1992, Slawson filed a second motion to remand, 

which is pending before us. In a status report accompanying the 

motion, Slawson noted that the litigation of Commission Order No. 

333152, the second despacing order, had 4 been concluded. In 

response, Mack Oil requested that the abatement of this appeal 

continue until the accounting issues have been resolved by the 

interpleader suit in Stephens County . 

After considering the progress of the related state 

litigation as reflected in Slawson's status reports and in Mack 

Oil's responses, we are persuaded that we should lift the 

abatement. The regulatory proceedings and related appeals to the 

Oklahoma Supreme Court that prompted our abatement of this appeal 

have been concluded. The parties' status reports indicate that 

the only state proceeding still underway that is related to this 

action is Mack Oil's interpleader suit in Stephens County. We see 

no justification for us to delay this appeal further. In deciding 

to lift the abatement we have considered that if there is federal 

subject matter jurisdiction over his action, Slawson is entitled 

to proceed with his case as a diversity matter. See. e.g ., New 

Orleans Public Service. Inc. v. Council of City of New Orleans, 

4 

The Oklahoma Court of Appeals vacated Order No. 333152, the 

second despacing order. Conoco, Inc. v. Co;r:poration Commission, 

No. 72,360, slip op. at 8 (Okla. Ct. App. Mar. 12, 1991) . The 

Oklahoma Supreme Court denied certiorari, and the mandate issued 

in November 1991. Slawson further noted that at Mack Oil's 

request the Commission on December 19, 1991, dismissed Mack Oil's 

repooling application related to the second despacing order. 

7 

Appellate Case: 84-2656 Document: 010110155950 Date Filed: 12/31/1992 Page: 7 
491 U.S. 35 0 , 358 (1989 ) ; Meredith v. Winter Haven, 320 U.S. 228 , 

234 - 35 (1943 ) ; Cohens v. Virginia, 19 U.S. (6 Wheat. ) 264, 4 04 

(1821 ) . 

Slawson's pending motion requests a remand t o the district 

c ourt and apparently he seeks to proceed there on the merits o f 

his diversity claims. However, there is an outstanding order of 

the district court dismissing Slawson's action for lack of subject 

matter jurisdiction. We must, therefore, first decide the merits 

of that jurisdictional ruling. Accordingly, we vacate our order 

of abatement, deny Slawson's pending motion to remand, and address 

the merits of the jurisdictional ruling of the district court. 

IV 

Our record and the Oklahoma court opinions reveal these 

salient undisputed facts. The OCC established a 640-acre drilling 

and spacing unit for the Deep Morrow and Deep Springer common 

sources of supply, inter alia, in 1980. Then while a 1982 

application by Slawson for an OCC order pooling interests of 

owners of oil and gas rights underlying Section 9 was pending, 

Mack Oil and Bunker Exploration Co. sought to have the OCC despace 

the unit into 160-acre units. 

However in 1983 the Commission authorized the drilling of a 

single unit well for Section 9 and pooled the drilling rights of 

owners in the 640-acre unit for certain formations . Slawson and 

Conoco , not a party here , elected to participate and pay their 

p r oportionate share of the well costs and so informed Mack Oil. 

Mack Oil commenced dril ling the Crabb No. 1-9 we ll and i t was 

comple ted in June 1984, proving to be a prolific well. 

8 

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In his 1984 complaint herein, Slawson alleged that Mack Oil 

refuses to recognize his claimed interest of some 15 percent in 

the well, which is based on his ownership of oil and gas rights in 

the entire 640-acre unit. Slawson requests that quiet title 

relief be granted as to his interest and that Mack Oil be required 

to account for the production from the well. 

Mack Oil filed a motion to dismiss for lack of subject matter 

jurisdiction, or a stay of proceedings. The district judge 

granted the motion to dismiss, stating that resolution of a 

dispute "which depends on whether modification of a spacing order 

was necessary or appropriate lies within the exclusive 

jurisdiction of the Commission." IR. at 99. 

court misjudged the nature of the case before 

In so ruling, the 

it. Instead of 

challenging whether the spacing and pooling orders in effect were 

necessary or appropriate, Slawson has asserted that the legal 

effect of the orders and the undisputed facts is that he is 

entitled to a 15 percent interest in the Crabb No. 1-9 well. We 

must agree that the quiet title and accounting claims before the 

district judge were not matters for the Commission because of any 

necessity to interpret or clarify its orders. Instead, the case 

calls for a determination by the court of the l egal effect of the 

Commission's orders, and then for quieting title and an accounting 

in accord with that determination. 

We have reviewed the Oklahoma and federal decisions defining 

the jurisdiction of the courts vis-a-vis that of the Commission. 

In Nilsen v. Ports of Call Oil Co., 711 P.2d 98 , 101 (Okla. 1985), 

the Oklahoma Supreme Court said that" [t)he district court clearly 

9 

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has jurisdiction t o adjudicate the legal effect (as distingu ished 

from t h e c ontinuing effectiveness) of a Commission order or o f an 

order of a court of competent jurisdict i on upon title to land . 11 5 

And in a later case somewhat similar to the title dispute 

here , Amoco Production Co. v. Corporation Commission , 751 P.2d 2 03 

(Okla. Ct . App . 1986 ) (adopted by the Oklahoma Supreme Court, 

February 9 , 1988 ) , the court held that t he Commission did not have 

"the authority to determine title in vested property interests." 

751 P.2d at 208. The issue in Amoco was the effectiveness of an 

election to participate in a well authorized by a pooling order. 

Amoco had timely drilled and done all that was necessary to have 

its interest become vested in the formations pooled. The court 

held that the Commission' s authority was only to authorize forced 

pooling of working interests on a unit-wide basis rather than on 

an individual well bore basis. Thus the legal effect of the 

Commission 's forced pooling order was for the courts to determine 

and the Commission ' s attempt to make that determination was 

reversed. Accord Southern Union Production Co. v. Corporation 

Commission , 465 P.2d 454 {Okla. 1970) (Commission held without 

5 

The court held in Nilsen that the Commission had jurisdiction 

to determine whe ther there was a continuous drilling operation 

sufficient to constitute the timely commencement of a well. The 

operators, Ports of Call , had lost two holes by blowouts and had 

attempted to start a third well after expiration of the 180 day 

period specified in the pooling order. The Oklahoma Supreme Court 

said that the question of compliance with the pooling order 

required a construction of the order and that the parties were 

entitled to have the issue clarified by the Commission. Id . at 

102-03. Thus the case involved not the legal effect of the order, 

but a determination whether the drilling operation complied with 

the requirements of the pooling order for the commencement of 

drilling of the unit well. 

10 

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authority to determine the legal effect of its orders upon rights 

f ' ) 6 o parties . 

We have also noted Eason Oil Co. v. Howard Engineering. Inc., 

801 P.2d 710 (Okla. 1990 ). Although the Eason court did not have 

before it a dispute as to the jurisdiction of the Commission as 

against that of the courts, this opinion of the Oklahoma Supreme 

Court illustrates a proper exercise of general jurisdiction by the 

courts in quiet title actions. The district court of Garfield 

County had confirmed the rights of both contractual and pooled 

participants in production from a well in a 640-acre spacing unit. 

The Commission later vacated its 640-acre spacing order and 

created 160 - acre spacing. Litigation erupted concerning the 

quantum of interest to which the contractual participants were 

6 

In GHK Exploration Co. v. Tenneco Oil Co., 847 F.2d 650 (10th 

Cir. 1988 ) , we reversed a district court judgment ordering payment 

to Tenneco of the cost of participation in a well and holding that 

Tenneco had clearly elected to participate in its drilling. We 

held that the determination to be made was for the Commission and 

not for the district court . We noted the general rule from the 

Oklahoma cases that "the Commission has jurisdiction to interpret, 

clarify, amend and supplement its orders and to resolve any 

challenges to 'the public issue of conservation of oil and gas.' 

The courts, on the other hand, have jurisdiction to enforce 

the Commission's orders and to resolve the 'private rights' of the 

parties that are usually created by private operating agreements 

under a forced pooling order." Id. at 652. 

We are satisfied that the GHK case is distinguishable from 

the instant controversy. In GHK, it was necessary to determine 

whether a particular provision of the pooling order involved was 

complied with by the correspondence attempting to make an 

election. Id. at 653 . Here there is no such dispute requiring an 

interpretation or clarification of the Commission's order. There 

is no dispute as to the actions that Slawson has taken in 

furnishing the irrevocable letter of credit and making payment on 

his share of the well costs. Instead only the legal effect of the 

despacing and repooling order, and the subsequent reinstatement of 

the 640-acre spacing and pooling are involved, the case thus falls 

squarely within the jurisdiction of the district court. 

11 

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entitled. The trial court quieted title in the contractual owners 

based on the percentage of ownership established before despacing 

occurred. The pooled participants objected and appealed from that 

ruling. 

The Oklahoma Supreme Court defined the legal issue as 

"whether the Commission's despacing order may operate to 

distinguish rights previously acquired under a valid pooling 

order." Id. at 714. The court held that the pooling order was 

valid ab initio and created vested rights in the participants at 

that time . Accordingly the Supreme Court affirmed the district 

court' s decree confirming the rights of the participants in the 

production from the well based on the initial spacing and pooling 

orders. The exercise of jurisdiction by the district court was 

not questioned by the Supreme Court. 

This case , like Eason and Amoco, involves the determination 

of the legal effect of OCC spacing and pooling orders, not the 

interpretation or clarification of such orders . Hence the 

district court, not the OCC, has subject matter jurisdiction over 

this controversy. Accordingly, we REVERSE the judgment dismissing 

the action for lack of subject matter jurisdiction. The cause is 

REMANDED for further proceedings in accord with this opinion. We 

express no opinion as to the determination which the district 

court should make as to proceeding in light of the pending state 

. 7 court suit. 

7 

The district judge will have discretion to make such a 

determination on how to proceed. "Generally, as between state and 

federal courts, the rule is that 'the pendency of an action in the 

(Footnote continued on next page ) 

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(Footnote continued) : 

Entered for the Court 

William J. Holloway, Jr. 

Circuit Judge 

state court is no bar to proceedings concerning the same matter in 

the Federal court having jurisdiction. . . . McClellan v. 

Carland [217 U.S. 268, 282 (1910) ) ." Colorado River Water 

Conservation District v. United States, 424 U.S. 800, 817 (1976 ) ; 

see also Moses H. Cone Hospital v. Mercury Construction Corp., 460 

U.S. 1, 16, 21-22 (1983 ) . However, we are advised that the 

proceeding in the District Court of Stephens County, Oklahoma, 

commenced in May 1988, is an interpleader action and Mack Oil 

asserts that the same issues involved here will be determined in 

that proceeding. In such circumstances we feel the district court 

has discretion to determine whether it should proceed before a 

state court determination. Zellen v. Second New Haven Bank, 454 

F. Supp. 1359 (D . Conn . 1978); see Will v. Calvert Fire Insurance 

Co., 437 U.S. 655, 665-66 (1978) (plurality opinion); Brillhart 

v. Excess Insurance Co. of America, 316 U.S. 491, 498 (1942). 

13 

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