Court Opinion

ID: 9468497
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:16:21.732971+00
Date Added: 2024-06-11T17:40:53.633313
License: Public Domain

LOGAN, Circuit Judge,
concurring:
As I understand the majority opinion, it remands to require the trial court to hold a hearing and accept evidence that will permit it to resolve the Fed.R.Civ.P. 19 questions. The evidence may show that the interest of at least one Oklahoma party to the unitization agreement will be adversely affected by the interpretation Francis Oil & Gas, Inc. seeks. If so, that party would have to be aligned as a defendant, which would destroy diversity and require dismissal of Francis’s action. I agree that the record is too incomplete to permit a determination whether any of the Oklahoma residents would oppose Francis’s position. Exxon declares that Phillips Petroleum Company has an interest adverse to Francis’s. But while Phillips has a working interest in the field and was paid for some stripper oil, the affidavit of the Phillips employee is noncommittal and neither it nor anything else in the record supports a conclusion that Phillips benefits from the formula Marathon uses to allocate payments for stripper oil. Of the other interest owners in the field who are Oklahoma residents, some have joined Francis in a suit in Texas against Exxon and some have not, but the record does not show whether any of those Oklahoma residents who have not joined the Texas suit benefit from Marathon’s interpretation of the agreement.
Additionally, as this action has been brought in Oklahoma, the federal court there may lack personal jurisdiction over some of the unit participants. If the evidence shows they cannot be joined and that they oppose the position taken by Francis, then just as with any Oklahoma residents that cannot be joined without destroying subject matter jurisdiction, the trial court must decide “whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed.”
With this understanding as to the type of hearing that the trial judge should hold, I concur in the judgment. I write separately to state the legal analysis that I think will *881require dismissal of this action if, as seems likely, an Oklahoma resident or some party to the agreement not subject to service of process by the court below has an interest that will be adversely affected if Francis prevails. I certainly agree with the majority that Fed.R.Civ.P. 19(a) is the starting point for analysis. The significant problem is raised in subsection (a)(2)(ii): whether the absence of other parties to the unit agreement may leave Exxon Corporation “subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations.” As the trial court recognized, if this suit were to proceed with only Francis and Exxon as parties and if Francis were to win, Exxon would be in violation of Department of Energy (DOE) regulations having the force of law, see 10 C.F.R. §§ 212.72, 212.75, 212.131 (1981), unless Exxon reduced the total of the payments it makes to other interest owners in this unit. If Francis were to win, other interest owners that also delivered more stripper oil than given credit for by Marathon’s accounting to Exxon would likely bring suit, and the doctrine of collateral estoppel probably would bar Exxon from relitigating the issue. See Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). At the same time, interest owners who delivered less stripper oil than allotted to them by Marathon’s accounting would undoubtedly resist reduction of Exxon’s payments to them, and because they were not parties to the action between Francis and Exxon, a prior judicial interpretation of the unit agreement would not bind them.1 They might successfully contend Exxon’s current payment method is proper. If so, Exxon would be paying for more stripper oil than it received from the unit, in violation of DOE regulations. See 20 C.F.R. § 212.75 (1981). Caught between the DOE regulations and these possible judicial decisions, Exxon is subject to a substantial risk of inconsistent obligations.
If the evidence shows that other participants in the unit cannot be joined while maintaining subject matter jurisdiction, then the court must look at subsection (b) of the Rule to determine if, in equity and good conscience, the action should proceed in the absence of those other unit interest owners. If Exxon prevails in this action, participants that agree with Francis’s view would not be prejudiced by their nonjoinder since they can relitigate the issue. As outlined above, however, if Exxon loses this action, it would face a substantial risk of inconsistent obligations. As to the second factor, I do not believe the court could shape the relief or take other measures to lessen or avoid the prejudice to Exxon. The third factor set out in Rule 19(b), “whether a judgment rendered in the person’s absence will be adequate,” does not apply. The fourth factor, “whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder,” is to me the key. Francis could bring its action in a state court in Texas where its oil interest is located and join all the interest holders there. I believe it is not unduly burdensome to require an Oklahoma resident who owns an oil lease on Texas land and enters into a unitization agreement regarding his lease interest to litigate in the state courts where the lease interest exists.

. That each interest holder in the unitized tract may have signed a separate consent to be a part of the unit does not, in my view, make them separate agreements. Francis signed a contract entitled “Working Interest Owner Ratification and Agreement to Become a Party to Unit Agreement and Unit Operating Agreement, Yates Field Unit, Pecos and Crockett Counties, Texas;” this contract clearly made Francis a party to the unit agreement and the unit operating agreement with the same status as every other interest holder.