Opinion ID: 158093
Heading Depth: 3
Heading Rank: 3

Heading: Exception to the Requirement of Finality

Text: Plaintiffs argue that the district court may exercise jurisdiction under Leedom v. Kyne, 358 U.S. 184 (1958), because the MMS exceeded its statutory authority by initiating the audit, requiring Plaintiffs to maintain records beyond the six-year period specified in 30 U.S.C. § 1713(b), and subpoenaing records more than six years old. In Kyne, the Supreme Court held that the federal district court had jurisdiction to review a National Labor Relations Board action despite a statutory provision intended to preclude such review because the agency had acted “in excess of its delegated powers and contrary to a specific prohibition in the [National Labor Relations] Act.” Kyne, 358 U.S. at 188. “In considering whether to proceed under Kyne, courts have emphasized that the case provides an exception of ‘very limited scope,’ to be ‘invoked only in exceptional circumstances.’” United States Dep’t of Interior v. FLRA, 1 F.3d 1059, 1061 (10th Cir. 1993) (citations omitted); see also Boire v. Greyhound Corp., 376 U.S. -19- 473, 481 (1964) (“The Kyne exception is a narrow one.”). According to this court’s interpretation of Kyne, agency action will only fall within the exception created by Kyne when the agency’s determination is “made in excess of its powers,” when the agency “disobeyed the express command of [its organic act] . . . and in doing so . . . acted in excess of its powers,” when the agency order is “an attempted exercise of power that had been specifically withheld,” and when it is “agency action taken in excess of delegated powers.” United States Dep’t of Interior, 1 F.3d at 1061 (quoting Kyne, 385 U.S. at 185, 186-87, 189, 190). Plaintiffs claim that Kyne applies here because the challenged subpoena was issued solely for purposes of an audit which Plaintiffs allege is in contravention of statutory limits on the agency’s authority. Specifically, they assert that under Phillips Petroleum Co. v. Lujan, 4 F.3d 858 (10th Cir. 1993) (Phillips III), the audits and subpoenas are illegal because the MMS is barred from initiating an audit and requesting records more than six years old. Plaintiffs contend that Phillips III stands for the proposition that an audit begun more than six years after the relevant records were generated is per se unlawful. To support their argument, they rely on the court’s statement in Phillips III that “it is clear that if the government fails to initiate an audit within six years after the records were generated, the delay is per se unreasonable.” Id. at 864. Reading this language in the context within which it was stated and in conjunction with the -20- holdings of Phillips I and Phillips III, we think Plaintiffs’ assertion is wide of the mark. First, this language is dictum. It was not directly related to the facts or the holding of the case, and it was simply intended to guide the district court’s determination on remand. The critical question in Phillips III was when a cause of action to recover unpaid royalties should accrue under 28 U.S.C. § 2415(a). See id. at 859. Answering this question, the court held that the government’s right of action under 28 U.S.C. § 2415(a) accrues “on the date the contract was breached, which was the date the royalties were due and payable.” Id. at 861. In response to the government’s claim that the statute of limitations was tolled under 28 U.S.C. § 2416(c) until the government completed its audit, the court held that the statute of limitations would be tolled until completion of an audit only if “facts material to the right of action [were] not known and reasonably could not be known without the audit, and [if] the audit was completed within a reasonable time after the deficient royalty payment.” Id. at 863 (internal quotation marks omitted). The Phillips III court reversed the district court’s decision barring the government’s claims and remanded for an evidentiary hearing on the tolling question to determine whether the government knew or reasonably should have known about the allegedly deficient royalty payment. See id. With respect to the remand order, the court then advised the district court to consider FOGRMA in -21- making its determination. In this limited scope, the court warned that “if the government fails to initiate an audit within six years after the records were generated,” id. at 864, then the government’s delay will not invoke the tolling of the six-year statute of limitations to pursue an action to collect unpaid royalties under 28 U.S.C. § 2415. See id. at 864. Conversely, Phillips III did not say that a six-year delay would prohibit the MMS from requiring a lessee to retain documents or to disclose documents beyond the six-year period required in 30 U.S.C. § 1713(b) in connection with an audit. Our clarification of Phillips III is supported by the language of § 1713(b). This section of FOGRMA specifically authorizes the Secretary to order a lessee to maintain documents “for a [period] longer” than the mandatory six years. 30 U.S.C. § 1713(b). Additionally, this court’s decision in Phillips I ratifies Defendants’ contention that the MMS has the authority to seek and require Plaintiffs to retain and disclose documents more than six years old which were voluntarily maintained by Plaintiffs prior to the audit. Phillips I specifically addressed whether the Secretary of the Interior and the MMS had the authority to order an oil and gas lessee to provide eight-yearold records in connection with an audit. See Phillips I, 951 F.2d at 259-60. The court clearly held that the defendants possessed that authority. Reversing the district court’s grant of summary judgment to the plaintiff-lessee, the court -22- determined that neither the six-year record-keeping requirement of 30 U.S.C. § 1713(b) nor the six-year statute of limitations on actions to collect royalty payments under 28 U.S.C. § 2415 precludes the MMS from seeking, and the lessee from disclosing, information that is more than six years old. See id. at 260-61. The court also stated that “[a]dministrative agencies vested with investigatory power have broad discretion to require the disclosure of information concerning matters within their jurisdiction,” id. at 260, and that the “[d]efendants’ investigatory power is their power to audit records maintained by [oil and gas] lessees.” Id. at 260 n.6. Phillips I further noted that “by giving the Secretary the authority to unilaterally extend the period for retaining records, Congress has recognized that [§ 1713(b)’s] six-year limitation is not absolute.” Id. at 260 n.5. Consequently, we think that the mention in Phillips III of a “per se unreasonable delay” related only to the court’s advice to the district court concerning the tolling of the six-year statute of limitations under 28 U.S.C. § 2415 in an action to recover unpaid royalties. While this case does not require us to decide whether Defendants have imposed upon Plaintiffs the obligation to retain their records for more than six years, it is plain under Phillips I that even if Defendants had imposed such an obligation they would not have contravened their statutory mandate. Because “‘this dispute is over the agency’s interpretation of -23- its statute and the regulations, an activity to which courts generally grant deference to agencies,’” Appellants’ App., Vol. II, Doc. 23 at 915 (quoting Veldhoen, 35 F.3d at 226), and because the MMS has not “acted in excess of its powers,” Kyne, 358 U.S. at 187, we hold that the case before us does not present the type of extraordinary circumstances necessary to invoke the narrow exception established in Kyne. “An attack on the authority of an agency to conduct an investigation does not obviate the final agency action requirement.” Veldhoen, 35 F.3d at 225.