Ramona Two Shields v. Spencer Wilkinson, Jr. , 790 F.3d 791 ( 2015 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-3773
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Ramona Two Shields; Mary Louise Defender Wilson, individually and on behalf
of others similarly situated
lllllllllllllllllllll Plaintiffs - Appellants
v.
Spencer Wilkinson, Jr.; Rick Woodward; Robert Zinke; Dakota-3 E&P Company,
LLC, Now known as WPX Energy Williston, LLC; Zenergy, Inc.; Dakota-3, LLC;
Dakota-3 Energy, LLC; Zenergy Properties 6 Ft. Berthold Allottee, LLC; John Doe
lllllllllllllllllllll Defendants - Appellees
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Indigenous Law and Policy Center
lllllllllllllllllllllAmicus on Behalf of Appellant(s)
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Appeal from United States District Court
for the District of North Dakota - Bismarck
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Submitted: October 9, 2014
Filed: June 12, 2015
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Before MURPHY, SMITH, and GRUENDER, Circuit Judges.
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MURPHY, Circuit Judge.
Appellants Ramona Two Shields and Mary Louise Defender Wilson are
Indians with interests in land allotted to them by the United States under the Dawes
Act of 1887. Such land is held in trust by the government, but may be leased by
allottees. Two Shields and Defender Wilson leased oil and gas mining rights on their
allotments to appellee companies and affiliated individuals who won a sealed bid
auction conducted by the Board of Indian Affairs (BIA) in 2007. Subsequent to the
auction, appellants agreed to terms with the winning bidders, the BIA approved the
leases, and appellees sold them for a large profit. Appellants later filed this putative
class action in the District of North Dakota,1 claiming that the United States had
breached its fiduciary duty by approving the leases for the oil and gas mining rights,
and that the defendant bidders aided, abetted, and induced the United States to breach
that duty. The district court concluded that the United States was a required party
which could not be joined, but without which the action could not proceed in equity
and good conscience, and dismissed the case. Appellants challenge that dismissal.
For the reasons stated below, we affirm.
I.
Two Shields and Defender Wilson are Indians who hold allotments on the
Bakken Oil Shale Formation in the Fort Berthold Reservation in the state of North
Dakota. Two Shields is a member of the Three Affiliated Tribes, a union of the
Mandan, Hidatsa, and Arikara Nations which operate as one tribal unit located on and
near the Fort Berthold Reservation. Defender Wilson is a member of the Standing
Rock Sioux Tribe. Following a sealed bid auction, Two Shields leased the oil and gas
mining rights for 320 acres of an allotment to the high bidder Zenergy Properties.
1
The Honorable Daniel L. Hovland, United States District Judge for the District
of North Dakota.
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Federal regulations provide for a minimum royalty rate of 16 b%; lower rates may
be permitted if found to be in the best interest of the Indian mineral owner. 25 C.F.R.
§ 211.41(b). Two Shields received a lease bonus of $451.48 per acre and an agreed
18% royalty rate. Two Shields also entered into another lease with Zenergy
Properties for an additional 320 acres of an allotment; Defender Wilson is also an
owner and heir in trust of this property. The lease provided for a bonus of $400 per
acre and an 18% royalty rate. Before their leases had operative effect, the BIA
certified as required by statute that they were "in the best interest of the Indian
mineral owner." See 25 U.S.C. § 396 (granting the Secretary of the Interior authority
to promulgate regulations regarding leasing of mining interests on allotted lands); 25
C.F.R. § 212.20 (regulations permitting Secretary to reject winning bid and
readvertise a mineral land tract for sale "if the Secretary determines that it is not in
the best interest of the Indian mineral owner to accept any of the bids"). The leases
were approved by the BIA in December 2007 and February 2008.
Appellee Spencer Wilkinson is a member of the Three Affiliated Tribes and
manages a casino on the Fort Berthold Reservation. Appellants allege that he and
appellee Robert Woodward devised a scheme to obtain funding from an unknown
third party, to use that funding to acquire oil and gas leases from the plaintiffs, and
to sell the oil and gas leases for a profit. Their complaint alleges that defendants
furthered this plot by using political influence to select BIA superintendents who
would approve the leases and ensure election of a tribal chairman who would have
the Three Affiliated Tribes pressure the BIA to approve the leases. Appellants also
allege that the BIA did not deny approval of or renegotiate a single lease on behalf
of Fort Berthold allottees, thereby breaching its fiduciary duty to maximize the value
obtained by Indian allottees and to ensure the leases were in their best interests.
Appellants filed this class action on November 26, 2012, alleging North Dakota
common law claims of aiding and abetting, tortious inducement, and conspiracy to
aid and abet breaches of fiduciary duty imposed by federal law. They also raised
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claims for constructive trusts and an accounting. Each claim other than the
accounting claim alleges as an element that the United States breached its fiduciary
duty to the Indian plaintiffs and that the defendants knew of, encouraged, or
wrongfully profited from that breach. The complaint named as defendants Dakota-3,
Dakota-3 E&P Co., Dakota-3 Energy, Zenergy, Inc., and Zenergy Properties 6 Ft.
Berthold Allottee and Spencer Wilkinson Jr., Rick Woodward, and Robert Zinke
(who are alleged to be affiliated with, or owners of, the Dakota-3 and Zenergy
companies). It also named the John Doe defendant who was alleged to have provided
funding for the scheme. It alleges that defendants ultimately leased roughly 85,000
acres of land, bundled the leases together for sale, and then sold the leases in 2010 to
a third party for $925 million. It claims that while defendants received over $10,000
per acre from their own sale, they paid some putative class members lease bonuses
of only $200 per acre or less. In this action allottees seek to recover from the lessees'
profits.
On February 1, 2013, appellants filed a separate complaint in the United States
Court of Federal Claims, in which they sought monetary damages from the United
States for alleged breaches of fiduciary duty that occurred when the BIA approved the
leases at issue here. While that case was pending, defendants in the federal district
court filed a Rule 12(b)(7) motion to dismiss this case for failure to join the United
States as a required party under Federal Rule of Civil Procedure 19, in addition to
other motions to dismiss under Rule 12. The United States filed an amicus brief that
argued it was a required party which could not be joined and that the case should be
dismissed. On November 26, 2013, the district court granted a Rule 12(b)(7)
dismissal for failure to join the United States after concluding that the United States
had an interest in the litigation and that the case could not go forward without it. The
other motions to dismiss were denied as moot. Appellants now appeal from the
district court's dismissal of their claims.
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Subsequent to oral argument in our court, the federal claims court issued a
February 6, 2015 decision in Two Shields v. United States, 119 Fed. Cl. 762, 788
(Fed. Cl. 2015), which granted summary judgment to the United States. In that
decision the court concluded that the claims plaintiffs raised had been included in a
class action settlement reached in earlier litigation. Id. at 778; see Cobell v. Salazar,
679 F.3d 909, 912 (D.C. Cir. 2012) (affirming district court approval of class
settlement agreement). Its February decision in Two Shields is currently on appeal,
but supplemental briefing from the parties before our court has been received
addressing the question of any potential relevance here.
II.
The federal district court determined that the United States is a required party
in this case which cannot be joined and that dismissal is therefore required under Rule
19. Fed. R. Civ. P. 19. Rule 19(a) defines "[r]equired party," and Rule 19(b)
provides factors to consider to determine whether dismissal is required when joinder
of such a party cannot feasibly be accomplished. See id.
A.
Rule 19(a)(1) provides that a party is required to be joined if feasible if:
(A) in that person's absence, the court cannot accord complete relief
among existing parties; or
(B) that person claims an interest relating to the subject of the action and
is so situated that disposing of the action in the person's absence may:
(i) as a practical matter impair or impede the person's ability to
protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent
obligations because of the interest.
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Fed. R. Civ. P. 19(a). We review de novo conclusions of law underlying a district
court's Rule 19(a) determination, Gwartz v. Jefferson Mem'l Hosp. Ass'n, 23 F.3d
1426, 1428 (8th Cir. 1994).
An amicus brief filed by the United States in the district court claimed
numerous interests relating to the subject matter of this action. These interests
include defense of the leasing decisions by the BIA and the Secretary of the Interior,
the correct interpretation and application of oil and gas leasing statutes and
regulations, and ensuring that Indian lessees are not subject to competing obligations.
The United States points out that the Secretary of the Interior has administrative
authority over the leases which appellants claim have been unlawfully approved and
would be free to continue to demand payment on them even if they were determined
unlawful by a federal court in an action to which the United States is not a party.
The district court noted that in order to prevail on their claims of aiding and
abetting or inducing a breach of fiduciary duty, lessors necessarily would have to
prove that the United States has acted illegally and breached its fiduciary duty in
approving the leases. The court concluded that the federal interests in administering
the leases and overseeing the grant of new leases would be affected by such a finding
and thus the United States is a required party. Appellants argue that the district court
erred because the only relief they seek is to recover monetary damages from appellees
for their having caused the United States to breach its fiduciary duty.
Our earlier decision in Nichols v. Rysavy, 809 F.2d 1317 (8th Cir. 1987) is
instructive on the potential interests of the United States. In Nichols, we dismissed
Indian allottee claims under Rule 19 for failure to join the United States. Id. at 1320.
The allottees there were descendants of Indians who had been given "forced fee
patents" on land which had been removed from trust status and titled to their
ancestors, without regard for whether their ancestors requested that action. Id. at
1321– 22. Such land had previously been held in trust by the United States in order
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to protect the Indians from attempts by others to cheat them of their newly acquired
property. Id. at 1321. After receiving their forced fee patents, the ancestors of the
Nichols plaintiffs lost or transferred title to their land. Id. at 1323. The federal policy
to grant forced fee patents was later abandoned, and the Nichols descendants
subsequently sued the United States, the state of South Dakota, one of its counties,
and private parties who had obtained the formerly allotted lands. Id. at 1320, 1323.
In that action the decedents sought return of possession, return of the allotted lands
to trust status, and damages. Id. at 1320.
Our court concluded that the Nichols claims against the United States were
time barred because the statute of limitations had run. 809 F.2d at 1331. After the
United States was dismissed, we undertook a Rule 19 analysis and concluded that the
case could not go forward without that party. Id. at 1334. We explained that "[t]he
United States, as the allotting agent, is the appropriate defendant in suits involving
the right to an allotment." Id. at 1333 (internal quotation marks omitted). We noted
that the presence of the United States was necessary in part because any ruling
declaring that the forced fee patents were granted illegally could require taking back
title to the land in trust. Id. We quoted with approval the district court's reasoning
that the plaintiffs' "claims have far reaching social, economic, and political
ramifications . . . . Title to millions of acres of land is clouded, thus affecting real
estate transactions, probate proceedings, and credit availability." Id. We also
observed that
the result of this suit, on the merits, would depend entirely on whether
the United States acted legally or illegally in granting fee patents . . . .
If the United States issued the patents legally, then appellants' action is
groundless. In short the government's liability cannot be tried behind its
back.
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Id. (internal quotation marks omitted). Similarly in the case now before our
court, the question of whether the United States has acted illegally in approving the
oil and gas leases for plaintiffs' allotments "cannot be tried behind its back." See id.
Appellants seek to distinguish Nichols because the allottees in that case had
sought return of lands to trust status, which would have required the government to
take title to the land, see 809 F.2d at 1333, while only damages are sought here.
Nevertheless, the Nichols plaintiffs had also argued "that complete relief [wa]s
available without the United States, for the land could be returned to the allottees and
damages paid." Id. at 1331. The Nichols court could have avoided the plaintiffs'
request that the United States return their allotments to trust status by remanding for
the district court to consider whether the lands had been illegally transferred under
the forced fee patent procedure. If they had been, the court could have ordered
damages paid to the allottee descendants for wrongful possession. Of course, any
potential determination about the legality of prior actions by the United States would
not have been binding since it was not a party in Nichols. See Provident Tradesmens
Bank & Trust Co. v. Patterson, 390 U.S. 102, 122 (1968) ("[T]here can be no binding
adjudication of a person's rights in the absence of that person."). We dismissed the
case after determining it could not proceed without the presence of the United States.
Similarly, any finding that the United States has breached its fiduciary duty
here would implicate interests similar to those which required dismissal in Nichols.
Without the participation of the United States, any determination that particular lands
had been illegally titled would potentially cloud the validity of many of the land
grants approved by the government. See 809 F.2d at 1333. Appellants argue that the
United States cannot be indispensable simply because its conduct is at issue, citing
Edmondson v. State of Neb. ex rel. Meyer, 383 F.2d 123, 127 (8th Cir. 1967) (injury
to a third party's reputation alone is insufficient to confer upon it a mandatory right
to intervention under Rule 24). The potentially far reaching effects of any decision
absent governmental participation show how different the interests of the United
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States are from those of a typical third party which claims no interest beyond
contesting allegations about its own improper conduct.
Other courts have recognized that the United States has an interest even
without being joined in actions which "indirectly attack" its administrative decisions.
Boles v. Greeneville Hous. Auth., 468 F.2d 476, 479 (6th Cir. 1972). For example,
the Boles plaintiffs challenged an urban renewal plan approved by the Department of
Housing and Urban Development (HUD) in an action against a local governmental
entity. Id. at 477. Although Rule 19 was not addressed in the district court, the Sixth
Circuit concluded that HUD was arguably indispensable and was "most hesitant to
set the precedent of allowing the policies and practices of HUD or any other federal
agency to be overhauled by the judiciary without at least affording the agency the
opportunity to be heard in support of its present operation." Id. at 479. This
reasoning is helpful in the case before our court, and we conclude that the United
States is a required party which must be joined under Rule 19(a) if feasible.
Appellants object that the United States cannot be a required party under Rule
19 because it is a joint tortfeasor and the rule never applies to such a party. In support
they cite a different principle of law—that "it is not necessary for all joint tortfeasors
to be named as defendants in a single lawsuit." Temple v. Synthes Corp., Ltd., 498
U.S. 5, 7 (1990). In Temple, the Court cited the Advisory Committee Notes to Rule
19 which indicate "a tortfeasor with the usual 'joint-and-several' liability is merely a
permissive party to an action against another with like liability." Id. (quoting Fed. R.
Civ. P. 19 advisory committee's note to 1966 amendment). To be sure, the United
States does not claim in this action "the usual" joint and several liability nor "like
liability" with that of the appellees. Instead, it claims an interest in the
administration, enforcement, and interpretation of its laws and regulations. Temple
did not establish that Rule 19 lacks application to all who are alleged to share liability
for a wrong. Instead, the rule instructs courts to examine the interests of an absent
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party in an effort to determine whether "as a practical matter" its ability to protect
those interests will be hindered. Fed. R. Civ. P. 19(a)(1)(B)(i).
An illustrative case in which an absent joint tortfeasor was necessarily
implicated is Laker Airways, Inc. v. British Airways, PLC, 182 F.3d 843 (11th Cir.
1999). There, Laker had sued British Airways (BA), for conspiring with Airport
Coordination Ltd (ACL) to reserve preferential take off and landing slots in British
airports. Id. at 845. Alleged conspirator ACL was a private English corporation
appointed by the government to oversee allocation of airport time slots, a task which
had been assumed by the United Kingdom under international transatlantic treaties.
Id. at 845–46. The Eleventh Circuit concluded that ACL was a required party whose
interests were "more significant than those of a routine joint tortfeasor." Id. at
847–48. It reasoned that a joint tortfeasor is a necessary party if it "emerges as an
active participant in the allegations made in the complaint that are critical to the
disposition of the important issues in the litigation." Id. at 848 (internal quotation
marks omitted). Similar to the allottee appellants here, Laker argued that ACL's
interests were not implicated because it sought only monetary damages from BA for
its conspiratorial conduct and no relief from ACL. Id. at 849. Although the requested
relief might not have directly implicated ACL, the court reasoned that Laker's claims
necessarily required an evaluation of ACL's actions, "thereby substantially
implicating ACL's interests." Id. at 848.
Like the court in Laker Airways, we reject an interpretation of the Supreme
Court's Temple decision that would categorically bar consideration of interests a joint
tortfeasor may have beyond those of joint and several liability. To prevail here, Two
Shields and Defender Wilson must prove that the United States breached its fiduciary
duty to ensure that the mining leases they signed were in the best interests of the
Indians. For the reasons previously stated the United States has an interest in that
determination, and its ability to protect its interest would be impaired or impeded by
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its absence. We therefore conclude that the United States is a required party which
should be joined if feasible under Rule 19(a).
B.
Since the United States has not waived sovereign immunity, it cannot be joined
in this action, and we review the district court's Rule 19(b) decision to dismiss for
failure to join an indispensable party under a deferential abuse of discretion standard.
Spirit Lake Tribe v. North Dakota, 262 F.3d 732, 746 (8th Cir. 2001). Once a party
is determined to be required, Rule 19(b) provides four factors that courts are to
consider in deciding "whether, in equity and good conscience, the action should
proceed among the existing parties or should be dismissed." Fed. R. Civ. P. 19(b).
These factors are:
(1) the extent to which a judgment rendered in the person's absence
might prejudice that person or the existing parties;
(2) the extent to which any prejudice could be lessened or avoided by:
(A) protective provisions in the judgment;
(B) shaping the relief; or
(C) other measures;
(3) whether a judgment rendered in the person's absence would be
adequate; and
(4) whether the plaintiff would have an adequate remedy if the action
were dismissed for nonjoinder.
Id.
The Rule 19 inquiry is a context sensitive one which may vary from case to
case. See Patterson, 390 U.S. at 118–19. In the specific context of an immune
sovereign entity that is a required party not amenable to suit, the Supreme Court has
explained that the action must be dismissed if the claims of soverign immunity are not
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frivolous and "there is a potential for injury to the interests of the absent sovereign."
Republic of the Philippines v. Pimentel., 553 U.S. 851, 867 (2008).
The holding of the Supreme Court in Pimentel might appear to diminish the
significance of the other Rule 19(b) factors in a case such as this, but our
consideration of those factors at this stage leads to the conclusion that the district
court did not abuse its discretion by its decision to dismiss. Although appellants
argue that dismissal would deprive them of any remedy against the lessees, the
Supreme Court has recognized that a defending party has an interest in avoiding "sole
responsibility for a liability he shares with another." Patterson, 390 U.S. at 110. We
consider this interest to be particularly strong here, where the wrongful conduct the
appellee lessees are alleged to have committed was inducing the United States to
breach its fiduciary duty to ensure that all leases are in the Indians' best interest; all
liability is therefore contingent upon evaluation of the actions of the United States.
Of significance is the fact that this is not the only action appellant allottees
have brought relating to the approval of the oil and gas lease agreements they made
with appellees. They also brought a damage action against the United States in the
Court of Federal Claims. That court has now granted summary judgment2 to the
United States after determining that appellants' lease claims had been addressed in a
settlement agreement with the government which was affirmed in Cobell v. Salazar,
679 F.3d 909 (D.C. Cir 2012). Two Shields v. United States, 119 Fed. Cl. at 788.
Although the claims court decision in Two Shields is currently on appeal, it appears
appellants will have had an adequate alternate remedy regardless of its outcome.
Should they prevail there and summary judgment be reversed, they might proceed to
trial against the United States for their alleged breach of fiduciary duty damages. If
2
Since judgment has been entered in that case, we need not reach the appellants'
argument that the district court should have coordinated the instant action with that
filed in the claims court.
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the claims court decision is affirmed, their relief will appropriately be limited to the
terms of the Cobell settlement agreement which the court found applicable to their
claims.
Appellants argue that the United States would suffer no prejudice from its
absence in the case since they claim appellees have similar interests to it and the
incentive to make "every argument on the merits that the absent [United States] would
or could make." Henne v. Wright, 904 F.2d 1208, 1212 n.4 (8th Cir. 1990). If a
defendant cannot be expected "to articulate the government's position on its behalf
in its absence," however, the "prejudice to the government is obvious." Spirit Lake
Tribe, 262 F.3d at 746. Appellants' claim that the government's interests will be
adequately protected by the defendant lessees does not withstand scrutiny. While one
potential defense for the lessees would be the argument that no fiduciary duty was
owed or breached, they are alleged to be coconspirators with the United States and
therefore have strong incentives to characterize any breach as resulting solely from
the government's independent action and judgment.
Two Shields and Defender Wilson assert that any prejudice to the interest of
the United States is lessened because it remains free to intervene under Rule 24(b)(2).
Rule 19(b) requires a court to examine whether a case can proceed "in equity and
good conscience" if joinder is not feasible, Fed. R. Civ. P. 19(b), but it does not
address the hypothetical intervention of an immune party which is not subject to
joinder. The United States enjoys sovereign immunity for appellants' claims and can
decide itself when and where it wants to intervene.
III.
In sum, we conclude that the district court was well within its discretion to
dismiss this case after careful analysis of the Rule 19 factors, the interests of the
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parties, and the interests and sovereign immunity of the United States. The judgment
of the district court is therefore affirmed.
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