Court Opinion

ID: 9450647
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:54:04.829309+00
Date Added: 2024-06-11T17:32:24.378231
License: Public Domain

*439ON PETITIONS FOR REHEARING
RIVES, Circuit Judge:
All parties have petitioned for rehearing and the Court has received additional briefs. In our original opinion, this Court held, Judge Wisdom dissenting, that federal law should be applied to determine rights asserted separately by Patrick A. McKenna and Pan American Petroleum Corporation in an oil and gas lease from the United States to Floyd A. Wallis covering public domain land. The district court had decided that under Louisiana law neither McKenna nor Pan American acquired any interest in the lease. We vacated the judgment and remanded the cause “for re-trial upon the evidence already taken and any additional relevant evidence, and for full and complete findings of fact and conclusions of law on all issues under the applicable principles of federal law.” Pan American has petitioned for a rehearing limited to the interpretation of its claimed option agreement with Wallis, and it requests this Court to find as a fact that Wallis breached his fiduciary relationship. McKenna limits his petition for a rehearing to a request for additional findings of a joint venture between Wallis and McKenna, that Wallis breached his fiduciary obligations to McKenna and that Wallis failed to prove fraud on the part of McKenna. Wallis challenges our holding that federal law governs the claims of McKenna and Pan American and our reliance upon Irvine v. Marshall, 61 U.S. (20 How.) 558, 15 L.Ed. 994 (1858).
As stated in our original opinion, the United States, acting through the Secretary of the Interior, issued an oil and gas lease of public domain land to Floyd A. Wallis pursuant to the Mineral Leasing Act of 1920, 30 U.S.C.A. § 181 et seq. We have concluded that our decision should be more closely tied to that Act.
It should be noted that the actions before the district court, and before this Court on appeal, do not seek to overturn the decision of the Secretary awarding the lease to Wallis. McKenna and Pan American were not applicants who competed with Wallis before the Secretary. Indeed, it is evident that McKenna and Pan American supported Wallis’s claim to the Secretary that he was the first qualified applicant for the acreage in question and entitled to a lease. If these actions were those of “competing claimants,” the Secretary’s decision would be subject to judicial review only if it were shown that he had acted arbitrarily or unreasonably or that his interpretation of what constitutes “public lands” was erroneous as a matter of law. E. g., Morgan v. Udall, 1962, 113 U.S.App.D.C. 192, 306 F.2d 799.
We again deal with which law applies, and particularly with the contention that the Rules of Decision Act, 28 U.S.C. § 1652 (1958), requires that state law be applied to determine the claims of McKenna and Pan American to the oil and gas lease. It appears that the district court felt that the Rules of Decision Act compelled adherence to the local law. See 200 F.Supp. at 471-472, n. 13. And the Tenth Circuit has followed that view in a case involving a claim of “joint venture” highly similar to McKenna’s claim here. Blackner v. Mc-Dermott, 10 Cir. 1949, 176 F.2d 498. That court held, inter alia, that
“ * * * jurisdiction of the court resting upon diversity of citizenship, and the action not being one under federal law, the relationship of the parties each toward the other in respect of the leasehold estate must be determined by the law of Wyoming. Erie Railroad Co. v. Tompkins, 304 U.S. 64, [58 S.Ct. 817, 82 L.Ed. 1188], * * * Ruhlin v. New York Life Insurance Co., 304 U.S. 202 [58 S.Ct. 860, 82 L.Ed. 1290]. * * *”
176 F.2d at 500. Although the actions in the instant case were predicated upon diversity of citizenship, and although the action is not one under federal law in the sense that federal law did not create the right of action, it does not necessarily follow that the district court *440was required to apply state law. The Rules of Decision Act1 says nothing about the basis of jurisdiction. While it is true in the bulk of diversity cases the substantive issues are nonfederal and hence state substantive law is determinative, this is not always true.2 The law applied should be keyed to the nature of the issue before the court; if nonfederal, state substantive law should be applied; if a federal matter is before the court, federal law should be applied.3 Francis v. Southern Pacific Co., 1948, 333 U.S. 445, 68 S.Ct. 611, 92 L.Ed. 798, involved an action for the wrongful death of a railroad employee who was killed while riding on a free pass. Jurisdiction was predicated upon diversity of citizenship and the right of action was created by state law. Federal statutes provided extensive regulation of the giving of free passes by railroad; however, these statutes were silent as to the tort duties of a railroad to the recipient of a free pass. The Supreme Court held that federal law was to be applied and that state’s tort law did not control. The “Erie doctrine” does not annul the federal courts’ responsibility to develop federal common law in aid of the uniform implementation and protection of federal interests.4
 In summary, when jurisdiction of the federal courts is based on diversity of citizenship, all nonfederal matters will be decided by applying the law of the state in which the court is sitting while federal issues in such cases will be decided by reference to federal law. Where federal matters are involved, the specific language of valid federal statutes will control when applicable; where federal statutes do not clearly articulate the law to be applied, federal courts must fill the interstices; federal courts can do this by reference to federal or state law and the choice here depends on a number of different factors.5 The first question presented in the instant case is whether or not “federal matters” are involved.6
Prior to 1920, lands of the United States containing deposits of coal, phosphate, sodium, oil, oil shale, and gas were open to location and acquisition of title. Congress, by its mining laws, provided that claims might be “located” on these lands on the performance of certain conditions. Congress also made' provision for issuing patents for claims located under the mining laws. See Wilbur v. United States ex rel. Krushnic, 1930, 280 U.S. 306, 314, 50 S.Ct. 103, 74 L.Ed. 445. When the location of a mining claim was perfected under the law, it had the effect of a grant by the United States of the right of present and exclusive possession. The claim was property in the fullest sense of that term and might be sold, transferred, mortgaged, and inherited without infringing any right or title of the United States. The right of the owner was taxable by the state and was “real property” subject to the lien of a judgment recovered against the owner in a state or territorial court. See id. at 316, 50 S.Ct. 103. However, the Mineral Leasing Act of 1920 effected a complete change of policy in respect of the disposition of lands containing deposits of coal, phosphate, sodium, potassium, oil, oil shale, or gas. Such lands were no longer to be open to location and acquisition of title, but only to lease. Id. at 314, 50 S.Ct. 103 (dictum). A mineral lease does not give the lessee anything approaching the full own*441ership of a fee patentee, nor does it convey an unencumbered estate in the minerals. Boesche v. Udall, 1963, 373 U.S. 472, 478, 83 S.Ct. 1373, 1376, 10 L.Ed.2d 491 (dictum) (Secretary has authority to cancel lease granted in violation of Act and regulations promulgated thereunder). In the latter case, the Supreme Court stated that,
“Unlike a land patent, which divests the Government of title, Congress under the Mineral Leasing Act has not only reserved to the United States the fee interest in the leased land, but has also subjected the lease to exacting restrictions and continuing supervision by the Secretary.”
Id. at 477-78, 83 S.Ct. 1373. Thus the Secretary is given power to prescribe rules and regulations governing in mi-, nute detail all facets of the working of the land leased. 30 U.S.C.A. § 189. The Secretary may direct complete suspension of operations on such land, 30 U.S.C.A. § 209, or require the lessee to operate under a cooperative or unit plan, 30 U.S. C.A. § 226(j). See Boesche v. Udall, 1963, 373 U.S. 472, 478, 83 S.Ct. 1373, 10 L.Ed.2d 491. And as we noted in our original opinion, the public policy of the United States directed at opposing the monopoly of federally-owned mineral deposits requires that the Secretary examine into the qualifications of the real lessee and any assignee of a mineral lease or of a part interest. See 30 U.S. C.A. §§ 181, 184. This includes oil and gas leases “acquired directly from the Secretary under this Act or otherwise * * * (including options for such leases or interests therein).” 30 U.S. C.A. § 184(d) (1). Such “options” are limited as to acreage, 30 U.S.C.A. § 184 (d) (1), and time, 30 U.S.C.A. § 184(d) (2). “No option * * * shall be en-forcible if entered into for a period of more than three years * * * without the prior approval of the Secretary.” 30 U.S.C.A. § 184(d) (2). By implication, “options” for less than three years may be freely entered into without prior approval. However, “No option * * * shall be enforcible until notice thereof has been filed with the Secretary * *.” 30 U.S.C.A. § 184(d) (2). Furthermore, assignments or subleases of all or part of the acreage included in an oil or gas lease must be approved by the Secretary. See Boesche v. Udall, 1963, 373 U.S. 472, 478, 83 S.Ct. 1373, 10 L.Ed.2d 491; 30 U.S.C.A. § 187a. The Secretary is required to disapprove the “assignment” or “sublease” only for lack of qualification under the Act or for lack of sufficient bond. See 30 U.S.C.A. § 187a. Nowhere in the Mineral Leasing Act of 1920 are the terms “assignment” and “option” defined.
The posture of the instant case is interstitial. The Secretary has granted a lease to Wallis. We deal with claims that are, in essence, an alleged “option” and an alleged “assignment,” but which, ultimately, must be approved by or registered with the Secretary. We think, therefore, that there is a sufficient federal interest for the substantive independence of the federal court in determining the claims of McKenna and Pan American.
It might be said that the absence of a congressional definition of “option” and “assignment” — whether they may be oral or arise by operation of trust — implies that we should look to the law of the state. But we are impressed by the fact that the Mineral Leasing Act of 1920 represents a comprehensive scheme of federal regulation. Besides the public policy directed at opposing the monopoly of federally-owned mineral deposits, Congress has expressed recent concern over “a potentially dangerous slackening in exploration for development of domestic reserves of oil and gas so necessary for our security in war and peace.” It removed “certain legislative obstacles to exploration for development of the mineral resources of the public lands and [to] spur greater activity for increasing our domestic reserves.” S.Rep. No. 1549, 86th Cong., 2d Sess. (1960), reprinted in 1960 U.S.Code Cong. & Ad.News pp. 3313, 3314-15. As Judge Wisdom noted in his dissent, the civil law does not recognize resulting trusts or constructive *442trusts and therefore the law of Louisiana differs importantly from the laws of the common-law states. While it might be said that the claim of McKenna for the assignment of part interest in the acreage covered by the lease and the claim of Pan American of the option agreement constitute transactions essentially of local concern and that the resulting litigation is “purely between private parties,” we think that the interest of the United States is directly affected. Compare Bank of America Nat’l Trust & Sav. Ass’n v. Parnell, 1956, 352 U.S. 29, 33-34, 77 S.Ct. 119, 1 L.Ed.2d 93. It is clear that the Mineral Leasing Act recognizes the devices of “assignments” and “options” as concomitants to the public policy against monopoly of federally-owned mineral deposits and, on the other hand, the public policy towards development of our mineral resources and increasing our domestic reserves. We do not think the use of these devices as a part of the scheme of carrying forth this public policy should be limited by interstitial restrictions imposed by the law of the State of Louisiana, which are not present in the other states. In a word, we think this is an area for uniformity.7
We hold to what we said in our original opinion in that “we would intimate no opinion as to who may ultimately be entitled to prevail in this litigation * * [T]he judgment should be vacated and the cause remanded for re-trial upon the evidence already taken and any additional relevant evidence, and for full and complete findings of fact and conclusions of law on all issues under the .applicable principles of federal law.”
Rehearing denied.

. “The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, • in cases where they apply.” 28 U.S.C.A. § 1652.

. See 1A Moore, Federal Practice ¶ 0.305 [3], at 3045 (2d ed. 1961).

. See 1A Moore, op. eit., supra, If 0.305 [3], at 3053.

. 50 Va.L.Itev. 1236 (1964).

. 1A Moore, op. eit., supra If 0.328, at 3901.

. As one student commentator has put it: “First, the federal court must determine whether a sufficient federal interest is present to preempt the authority of state law.” 50 Va.L.Rev. 1236, 1241 (1964).

. Hodgson v. Federal Oil & Development Co., 1927, 274 U.S. 15, 47 S.Ct. 502, 71 L.Ed. 901, does not lead to a different result. We read Hodgson as fashioning a federal law of fiduciary relationship by drawing on the law of several states. See id. at 19-20, 47 S.Ot. 502.