Meier v. Chesapeake Operating ( 2019 )

FILED
UNITED STATES COURT OF APPEALSUnited States Court of Appeals
Tenth Circuit
FOR THE TENTH CIRCUIT
________________________________ June 21, 2019
Elisabeth A. Shumaker
MATT MEIER; SHERYL MEIER; KAI Clerk of Court
BACH, on behalf of themselves and all
others similarly situated,
Plaintiffs - Appellants,
v. No. 18-6152
(D.C. No. 5:17-CV-00703-F)
CHESAPEAKE OPERATING L.L.C.; (W.D. Oklahoma)
DEVON ENERGY PRODUCTION
COMPANY, LP; MIDSTATES
PETROLEUM COMPANY LLC; NEW
DOMINION, LLC; RANGE
PRODUCTION COMPANY, LLC;
SPECIAL ENERGY CORPORATION;
WHITE STAR PETROLEUM, LLC,*
Defendants - Appellees.
_________________________________
ORDER AND JUDGMENT**
_________________________________
*
While this appeal was pending, Defendant White Star Petroleum, LLC filed a
Notice of Bankruptcy. A bankruptcy petition operates as a stay of “the
continuation . . . of a judicial . . . proceeding against the debtor that was or could
have been commenced before the commencement of [the bankruptcy proceeding], or
to recover a claim against the debtor that arose before the commencement of the
[bankruptcy] case.” 11 U.S.C. § 362(a)(1). On the other hand, an automatic stay
generally does not stay “litigation as to co-defendants of the bankrupt.” Fortier v.
Dona Anna Plaza Partners, 747 F.2d 1324, 1329 (10th Cir. 1984). Accordingly, this
case is stayed as to White Star Petroleum, but not as to the other defendants.
**
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Federal Rule of Appellate Procedure 32.1 and
Tenth Circuit Rule 32.1.
Before HARTZ, EBEL, and McHUGH, Circuit Judges.
_________________________________
Several Oklahoma homeowners brought a class-action lawsuit against
operators of wastewater disposal wells for hydraulic fracturing operations, alleging
the injection wells were significantly increasing seismic activity across large portions
of Oklahoma. The only damages the homeowners sought were the increased costs of
obtaining and maintaining earthquake insurance. The district court dismissed the
lawsuit for failure to state a claim, reasoning that Oklahoma law does not permit
recovery of increased insurance premiums stemming from a defendant’s creation of
risk where plaintiffs have not suffered any actual earthquake damage to their persons
or property. On appeal, the homeowners argue the district court dismissed the lawsuit
based on an erroneous Erie guess of Oklahoma tort law, and, in the alternative, they
request that this court certify the question to the Oklahoma Supreme Court. We
decline to certify the question and affirm the district court.
I. BACKGROUND
Plaintiffs Matt Meier, Sheryl Meier, and Kay Bach (collectively, “the
homeowners”) all own homes and property in Oklahoma. The defendants in this case
are seven oil and gas companies whose hydraulic fracturing operations in Oklahoma
involve the injection of wastewater deep into the ground. The homeowners allege that
“[b]y injecting millions of barrels of wastewater below the Arbuckle, Defendants
2
have directly caused [an] unprecedented rise in Oklahoma earthquake activity.”1 App.
at 38. They claim that “[m]ultiple scientific studies have established a causal link
between the injection of production wastewater into the Arbuckle via disposal wells,”
and they cite several studies indicating that “the number of [earth]quakes in
Oklahoma [has] increased exponentially after 2008.” Id. at 39, 49. This increase in
earthquake activity, they allege, “has caused some earthquake insurance companies to
hike their premiums by as much as 260 percent in the last three years alone, and
many companies have ceased writing new insurance policies.” Id. at 49. They claim
that “[a]s a direct and foreseeable result of Defendants’ conduct, Oklahomans have
been forced to purchase earthquake insurance to protect their homes and property,”
and that because of the defendants’ activities, such insurance costs significantly more
than it previously did. Id. at 48. The homeowners do not claim this increased seismic
activity has caused any actual damage to their homes or properties. Rather, they
simply seek to recover “[t]he value of premiums paid to obtain earthquake insurance
coverage; and/or . . . [t]he excess amount required to maintain earthquake insurance
coverage after 2009,” as well as punitive damages. See id. at 53–55.
The homeowners originally filed their complaint in Oklahoma state court in
the District Court of Payne County, asserting class allegations and alleging public
nuisance, private nuisance, ultrahazardous activities, and negligence. They sought to
represent a class defined (in relevant part) as “[a]ll citizens in Oklahoma who
1
The Arbuckle formation is a geological formation covering much of
Oklahoma.
3
purchased or maintained earthquake insurance for their homes or property from 2008
through the time the class is certified.” Id. at 49. The defendants removed the case to
the federal district court for the Western District of Oklahoma pursuant to the Class
Action Fairness Act, 28 U.S.C. § 1332(d). All of the named defendants then moved
to dismiss the homeowners’ complaint under Federal Rules of Civil Procedure
12(b)(1) and 12(b)(6), arguing the homeowners lacked standing to bring their suit and
had failed to state a claim for relief. The district court held the homeowners did have
standing to sue, but it dismissed their suit for failure to state a claim, predicting that
“the Oklahoma Supreme Court, if confronted with the issue, would find the relief
requested by plaintiffs not legally cognizable under the circumstances present in the
case at bar.”2 Id. at 84. Reviewing case law from Oklahoma and other states, the
court found no authority “support[ing] an award of insurance premiums under the
circumstances presented.” Id. at 84–85. The homeowners timely appealed.
II. DISCUSSION
We first consider the homeowners’ request that we certify the question
presented to the Oklahoma Supreme Court. Declining the invitation to certify the
2
One of the defendants, Midstates Petroleum Company LLC, independently
moved to dismiss the complaint pursuant to Rule 12(b)(1), arguing that any claims
against it had been previously discharged pursuant to a bankruptcy order in a Chapter 11
bankruptcy case. The district court granted this motion in part and denied it in part. The
homeowners never addressed the bankruptcy issue on appeal and so, as the defendants
argue, the homeowners have forfeited any contention that the district court erred in that
part of its ruling. See Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir. 2007).
4
question, we then analyze how the Oklahoma Supreme Court would answer the
question.
A. Certification
Where a district court declines to certify a question, “[a] motion for
certification may be brought independently and anew to the court of appeals.” Pino v.
United States, 507 F.3d 1233, 1235 (10th Cir. 2007); see 10th Cir. R. 27.1. “Such a
motion requires us to determine whether certification is appropriate as a de novo
matter without regard to the district court’s assessment.” Pino, 507 F.3d at 1235(emphasis omitted).
“[W]e will not trouble our sister state courts every time an arguably unsettled
question of state law comes across our desks.” Id. at 1236. Rather, we have set down
the following framework for deciding whether to certify:
While we apply judgment and restraint before certifying . . . we will
nonetheless employ the device in circumstances where the question
before us (1) may be determinative of the case at hand and (2) is
sufficiently novel that we feel uncomfortable attempting to decide it
without further guidance.
Id. Here, the question presented is clearly “determinative of the case at hand,” id.,since it is the ground on which the district court granted the defendants’ 12(b)(6)
motion and the sole substantive question on appeal.
On the other hand, the second factor—whether the question is “sufficiently
novel that we feel uncomfortable attempting to decide it without further guidance”—
weighs somewhat against certification. See id. Admittedly, the question whether a
plaintiff may collect damages for increased insurance premiums absent any physical
5
damage is novel insofar as the Oklahoma Supreme Court has not specifically
addressed it. Indeed, some good-faith arguments can be adduced in favor of the
homeowners’ position. Nevertheless, as we discuss in the following section, it is
highly unlikely, given Oklahoma law and the bulk of out-of-state authority, that the
Oklahoma Supreme Court would hold in favor of the homeowners. “When we see a
reasonably clear and principled course, we will seek to follow it ourselves”—even if
no state supreme court precedent is directly on point. Pino, 507 F.3d at 1236; see also
17A Fed. Prac. & Proc. § 4248 (3d ed.) (“Questions ought not be certified if the
answer is reasonably clear.”). Because we can pursue a “clear and principled course”
here without troubling the Oklahoma Supreme Court for guidance, the second Pino
factor weighs against certification.
Apart from these two factors, an additional consideration strongly discourages
us from certifying: namely, the fact that the homeowners never requested
certification until the district court ruled against them on the merits.3 Where a party
does not initially request certification from the district court, but raises the issue for
the first time after an adverse district court ruling, this weighs heavily against
certification.4 See Pacheco v. Shelter Mut. Ins. Co., 583 F.3d 735, 738 (10th Cir.
3
None of the parties mentioned this critical fact in their briefing before this
court. Still, because the decision whether to certify “rests in the sound discretion of
the federal court,” we take this fact into account for our analysis. Lehman Bros. v.
Schein, 416 U.S. 386, 391 (1974).
4
Some states do not allow federal district courts to certify questions and in
those states, it would make little sense to fault a party for failing to request that the
district court do so. See, e.g., Cal. R. Ct. 8.548(a) (allowing certification only from
6
2009). “Otherwise, the initial federal court decision [would] be nothing but a gamble
with certification sought only after an adverse decision.” Perkins v. Clark Equipment
Co., Melrose Div., 823 F.2d 207, 210 (8th Cir. 1987); see also Complaint of McLinn,
744 F.2d 677, 681 (9th Cir. 1984) (“Ordinarily such a movant should not be allowed
a second chance at victory . . . .”).
Because the question is not “sufficiently novel that we feel uncomfortable
attempting to decide it without further guidance,” and because the homeowners did
not seek certification until after they were unsuccessful in the district court, we
decline to certify the question. Instead, we now proceed to the merits and consider
whether, under Oklahoma law, a homeowner can sue for increased insurance
premiums absent any actual damage to property.
B. Damages for Increased Insurance Premiums
The district court dismissed the homeowners’ lawsuit for failure to state a
claim, reasoning that Oklahoma law does not recognize a claim for increased
“the United States Supreme Court, a United States Court of Appeals, or the court of
last resort of any state, territory, or commonwealth”). Every state in the Tenth
Circuit, however, allows federal district courts to submit certified questions to the
state supreme court. See Colo. App. R. 21.1 ("The supreme court may answer questions
of law certified to it by . . . a United States District Court . . . ."); Kans. Stat. Ann. § 60-
3201 ("The Kansas supreme court may answer questions of law certified to it by . . . a
United States district court . . . ."); 20 Okla. Stat. Ann. 1602 ("The Supreme Court and the
Court of Criminal Appeals may answer a question of law certified to it by a court of the
United States . . . ."); N.M.R.A. 12-607 ("The Supreme Court may answer by formal
written opinion questions of law certified to it by a court of the United States . . . ."); Utah
R. App. P. 41(a) ("The Utah Supreme Court may answer a question of Utah law certified
to it by a court of the United States . . . ."); Wyo. Stat. Ann. 1-13-106 ("The supreme
court may answer questions of law certified to it by a federal court . . . .").
7
insurance premiums based on a risk that “has not materialized”—that is, where
“plaintiffs have suffered no damage to their homes or their persons.” See Meier v.
Chesapeake Operating L.L.C., 324 F. Supp. 3d 1207, 1219 (W.D. Okla. 2018). We
agree.
“We review de novo the dismissal of a complaint for failure to state a claim
under Rule 12(b)(6).” Childs v. Miller, 713 F.3d 1262, 1264 (10th Cir. 2013).
Moreover, in a diversity action, “we review the district court’s interpretation and
determination of state law de novo.” Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 850
(10th Cir. 2015) (quotation marks omitted). As a federal court sitting in diversity, we
must “conform to Oklahoma’s substantive law.” Stauth v. Nat’l Union Fire Ins. Co.
of Pittsburgh, 236 F.3d 1260, 1267 (10th Cir. 2001). Where, as here, “no decision of
a state’s highest court has addressed an issue of that state’s law,” the federal court
“must predict how the State’s highest court would rule.” Stuart v. Colo. Interstate
Gas Co., 271 F.3d 1221, 1228 (10th Cir. 2001). In doing so, “[w]e are free to
consider all resources available, including decisions of [Oklahoma] courts and the
general trend of authority.” Pehle v. Farm Bureau Life Ins. Co., 397 F.3d 897, 901–
02 (10th Cir. 2005) (quotation marks omitted).
Although no Oklahoma authority specifically addresses the question at hand,
“other states have consistently failed to recognize a cause of action for increased
insurance premiums based on a tortfeasor’s negligence.” Severn Place Assoc’s v. Am.
8
Bldg. Serv., Inc., 930 So. 2d 125, 128 (La. App. 2006) (collecting cases).5 On this
point, the defendants have amassed significant case law rejecting the notion of
damages for increased insurance premiums. See, e.g., Schipke v. Grad, 562 N.W.2d
109 (S.D. 1997) (refusing to allow a cause of action for increase in employer’s
workers’ compensation premiums); RK Constructors, Inc. v. Fuso Corp., 650 A.2d
153 (Conn. 1994) (same); Johnson v. Broomfield, 580 N.Y.W.2d 122 (N.Y. Jus. Ct.
1991) (concluding that a negligent driver was not liable for increase in plaintiff’s car
insurance premiums because damages were too remote and driver had no control over
plaintiff’s contractual arrangement with his insurer).
The homeowners cite decisions applying the loss-of-a-chance doctrine to
award damages proportionate to the increased risk a tortfeasor has caused, even
though that risk has not yet materialized into an actual harm. See, e.g., McKellips v.
Saint Francis Hosp., Inc., 741 P.2d 467, 474–75 (Okla. 1987). But the Oklahoma
Supreme Court has expressly declined to extend this doctrine—whose “essence . . . is
the special relationship of the physician and the patient”—beyond the medical-
malpractice context. Hardy v. S.W. Bell Tel. Co., 910 P.2d 1024, 1029 (Okla. 1996).
For example, in Hardy, a plaintiff brought a wrongful death claim against a telephone
5
The homeowners rightly observe that Louisiana civil decisions, grounded as
they are in codal law, might be unhelpful in resolving questions of common law. See
Frederick v. Brown Funeral Homes, Inc., 62 So. 2d 100, 111 (La. 1952) (“While the
common-law authorities relied upon and cited by the plaintiffs may be persuasive,
they are not decisive of the issue in view of our codal articles and jurisprudence.”).
Like the district court, however, we find Severn Place Associates persuasive mainly
for its survey of other states’ approaches to the issue.
9
company, alleging the company had negligently caused a failure of the 911
emergency system, thus preventing him from promptly calling an ambulance when
his wife suffered a heart attack. Id. at 1026. Although the plaintiff admitted he did
“not know if his wife would have survived if the ambulance could have been
summoned and had arrived in its normal response time,” he argued “the delay caused
a loss of his wife’s chance to survive the heart attack.” Id. at 1027. On a certified
question, the Oklahoma Supreme Court called the loss-of-a-chance doctrine a
“remarkable exception to the traditional rule of the standard of proof of causation”
and declined to extend the doctrine to a non-physician tortfeasor’s creation of risk,
reasoning that “application of the lost chance of survival doctrine to these facts . . .
would cause a fundamental redefinition of the meaning of causation in tort law.” Id.
at 1029–30.
Thus, it is highly unlikely the Oklahoma Supreme Court would allow
proportional recovery for unmaterialized risk here, given its refusal to extend the
loss-of-a-chance doctrine elsewhere. Apart from the medical malpractice context,
none of the authorities the homeowners cite actually support “a recovery in tort . . .
without . . . personal injury or property damages.” Appellants’ Op. Br. at 17
(quotation marks omitted); see Midwest City v. Eckroat, 387 P.2d 123, 127–29 (Okla.
1963) (allowing nuisance damages where adjacent sewage plant turned creek running
through property green with slime); Sand Springs Materials LLC v. City of Sand
Springs, 243 P.3d 768, 770–75 (Okla. Ct. Civ. App. 2010) (discussing a zoning
10
appeal involving a special use permit to operate a rock quarry but never addressing
tort damages).
The homeowners also argue, “[T]he district court here found the injury [they]
suffered . . . was not too remote or unforeseeable to justify dismissal under Rule
12(b)(6).” Appellants’ Reply Br. at 11. Based on their record citations, the
homeowners are apparently referring to the district court’s conclusion that they had
standing to sue (specifically addressing the injury-in-fact component of the standing
inquiry). See App. at 80 (“The court finds that these allegations are sufficient to
demonstrate an actual concrete and particularized injury-in-fact.”). But “one must not
‘confus[e] weakness on the merits with absence of Article III standing.’” Ariz. State
Legislature v. Ariz. Indep. Redistricting Comm’n, 135 S. Ct. 2652, 2663 (2015)
(quoting Davis v. United States, 564 U.S. 229, 249 n.10 (2011)). The injury-in-fact
analysis for standing purposes is distinct from the question whether a plaintiff has
adequately pleaded a claim for damages under Oklahoma law. Indeed, if courts
conflated the two analyses, then every plaintiff who satisfies the minimum Article III
requirements for standing would necessarily survive a 12(b)(6) motion, and could
proceed to discovery, on the sole basis of a nominal damages claim. But such is not
the case. Injury-in-fact for standing purposes simply requires that the plaintiff have a
“sufficient personal stake” in the outcome of the litigation; “it in no way depends on
the merits of the claim.” ASARCO Inc. v. Kadish, 490 U.S. 605, 613, 624 (1989)
(quoting Warth v. Seldin, 422 U.S. 490, 500 (1975)) (quotation marks and alteration
omitted). In contrast, the “injury” required for purposes of 12(b)(6) is one that
11
satisfies the damage element of the plaintiff’s tort claim under Oklahoma law.
Burnett v. Mortg. Elec. Registration Sys., 706 F.3d 1231, 1236 (10th Cir. 2013)
(evaluating 12(b)(6) motion by “comparing the pleading with the elements of the
cause(s) of action” and determining whether the plaintiff “set forth plausible claims
animating the elements of her causes of action” (quotation marks omitted)); see also
Richards v. City of Lawton, 629 P.2d 1260, 1263 (Okla. 1981) (“An essential element
in every common-law negligence-based tort claim is the occurrence of damage
proximately caused by the breach of an alleged duty.”). As discussed, the
homeowners have not adequately alleged such an injury under Oklahoma law.
The homeowners also argue Article 2, § 6 of the Oklahoma Constitution and
Title 23, § 3 of the Oklahoma Statutes support their right to damages by creating a
broad right to recovery for “all those [damages] allowed by the common law.”
Appellants’ Op. Br. at 9. But this argument plainly mischaracterizes the two
provisions it relies on. Neither one creates a freestanding entitlement to relief for
wrongs: courts have repeatedly explained that Article 2, § 6 of the Oklahoma
Constitution merely “mandates that the courts should be open and afford a remedy
for those wrongs that are recognized by the law of the land.” McCormick v.
Halliburton Co., 895 F. Supp. 2d 1152, 1156 (W.D. Okla. 2012) (quoting Rivas v.
Parkland Manor, 12 P.3d 452, 457–58 (Okla. 2000)); see also City of Anadarko v.
Fraternal Order of Police, Lodge 118, 934 P.2d 328, 330 (Okla. 1997) (“Section 6 is
intended ‘to guarantee that the judiciary would be open and available for the
resolution of disputes, but not to guarantee that any particular set of events would
12
result in court-awarded relief.’” (quoting Rollings v. Thermodyne Indus., 910 P.2d
1030, 1032 (Okla. 1996))); Adams v. Iten Biscuit Co., 162 P. 938 (Okla. 1917)
(“Neither do we think [Article 2, § 6] was intended to preserve a particular remedy
for given causes of action in any certain court of the state, nor was it intended to
deprive the Legislature of the power to abolish remedies for future accruing causes of
action . . . .”). Similarly, Title 23, § 3 of the Oklahoma Statutes merely defines
recoverable damages as “compensation . . . in money” for a “detriment” caused by
“the unlawful act or omission of another.” 23 Okla. Stat. Ann. § 3. Because the
creation of an unmaterialized risk is not an “unlawful act or omission” under
Oklahoma tort law, see id., and increased insurance premiums based on such risk are
not damages “allowed by the common law,” see Okla. Const. Art. 2, § 6, neither of
these provisions creates a cause of action where the homeowners have otherwise
failed to demonstrate one.
Finally, the homeowners argue that the district court improperly dismissed
their suit because, where only damages are disputed, Oklahoma law reserves the
question for a jury. To be sure, Oklahoma courts have repeatedly recognized that
“[w]here it is shown that some damage has resulted from [a] defendant’s wrongful
act, uncertainty as to the exact amount is no reason for denying damages altogether.”
George v. Greer, 250 P.2d 858, 860 (Okla. 1952) (quoting 25 C.J.S. Damages § 162
(1952)). But that principle is inapposite here, where the homeowners have failed to
plead any legally cognizable harm. The question presented is not simply what
damages the homeowners are entitled to, but, rather, whether the sole “relief” they
13
request in their complaint “is legally cognizable.” Meier, 324 F. Supp. 3d at 1215.
Because the homeowners pleaded no legally cognizable claim for relief, the district
court properly dismissed their complaint under Rule 12(b)(6).6
III. CONCLUSION
For the foregoing reasons, we decline to certify the question to the Oklahoma
Supreme Court and we affirm the district court.
Entered for the Court
Carolyn B. McHugh
Circuit Judge
6
The homeowners argue for the first time in their reply brief that even if they
are not entitled to damages based on increased insurance premiums, “[a]t the very
least, Oklahoma law would allow the recovery of nominal damages,” which in turn
would support punitive damages. Reply Br. at 8–9; see Moyer v. Cordell, 228 P.2d
645, 650 (Okla. 1951) (“[I]n order to authorize punitive damages, mere nominal
damages are sufficient.” (quoting Halliburton-Abbott Co. v. Hodge, 44 P.2d 122, 127
(1935))). Because they never requested nominal damages in their complaint, did not
raise the issue in their briefing to the district court, and did not address the argument
in their opening brief, they have waived this argument. See Adler v. Wal-Mart Stores,
Inc., 144 F.3d 664, 679 (10th Cir. 1998). In any event, even nominal damages require
“an actionable wrong,” which the homeowners have failed to plead. Moyer, 228 P.2d
at 650 (quoting Halliburton-Abbott, 44 P.2d at 127).
14
18-6152, Meier, et al. v. Chesapeake Operating
HARTZ, J., Circuit Judge, concurring.
I am pleased to join the panel opinion except for the discussion of certification. I
agree that we should not certify to the Oklahoma Supreme Court the issue presented on
this appeal, but my reason is simply that there is little doubt how the state court would
resolve that issue.
I realize that the panel opinion follows circuit precedent in its discussion of
certification, and much of that precedent is sound. But I am afraid that some of the things
this court has said in the past were ill-conceived, or at least are now outdated. We should
not assume that state high courts consider it a burden to receive requests for certification
from us. No doubt some of those courts have such caseloads that they do not welcome
additional work. But many are eager for the opportunity to address unresolved issues of
state law. They are, of course, the proper institutions to declare what state law is. Yet in
an era when many significant disputes are referred to alternative dispute resolution and a
high percentage of those that come to the courts are settled before definitive rulings on
state law, the opportunity for state high courts to declare state law is dwindling. If we
retain an issue for us to decide, it may be years before it needs to be resolved in state
court.
Rather than using a one-size-fits-all approach to certification, the federal courts
should discuss the matter periodically with the state courts. It seems to me that the
desires of the particular state high court should be the primary consideration, at least so
long as the state court can commit to promptly deciding certified issues so that justice is
not unduly delayed. The federalism interest in coordinating with the state courts should
outweigh such matters as a presumption against certification or whether or when the
parties have sought certification during the litigation.1 If the appellate court is confronted
with an important unresolved dispositive issue of state law, it should seriously consider
certification regardless of whether any party is requesting certification or has requested it
in district court.
1
A strong presumption against granting a request for certification from a party that did
not seek certification at the trial level is particularly unwarranted. The state high court
may look unfavorably on a request from a trial court when the underlying facts are not
fully developed or when it is not at all clear that the state-law issue will end up being
dispositive, or even material, to the resolution of the dispute. As a result, the propriety of
certification may frequently be uncertain before judgment is entered.
2