Twin City Technical v. Williams Cty , 2022 ND 63 ( 2022 )

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
MARCH 17, 2022
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2022 ND 63Twin City Technical LLC, Three Horns
Energy, LLC, Prairie of the South LLC,
and Irish Oil & Gas, Inc., Plaintiffs and Appellees
v.
Williams County and Williams County
Commission, Defendants and Appellants
No. 20210157
Appeal from the District Court of Williams County, Northwest Judicial
District, the Honorable Benjamen J. Johnson, Judge.
AFFIRMED AS MODIFIED.
Opinion of the Court by Tufte, Justice.
Mark W. Vyvyan (argued), Minneapolis, Minnesota, Lawrence Bender
(appeared), and Spencer D. Ptacek (on brief), Bismarck, North Dakota, for
plaintiffs and appellees.
Scott K. Porsborg (argued) and Austin T. Lafferty (appeared), Bismarck, North
Dakota, for defendants and appellants.
Twin City Technical v. Williams County
No. 20210157
Tufte, Justice.
[¶1] Williams County and Williams County Commission (collectively,
“County”) appeal from a judgment in favor of Twin City Technical LLC, Three
Horns Energy, LLC, Prairie of the South LLC, and Irish Oil & Gas, Inc.
(collectively, “Companies”) on their claim of unjust enrichment and adverse
orders granting a bench trial, compelling discovery, and awarding expenses
and attorney’s fees. We conclude the County is barred from relitigating unjust
enrichment and raising the defenses of waiver and unclean hands; and the
district court did not err in finding laches did not bar the Companies’ unjust
enrichment claim, awarding prejudgment interest beginning from September
2015, ordering a bench trial, granting the Companies’ motion to compel, and
awarding expenses and attorney’s fees. We affirm, but modify the order
awarding expenses and attorney’s fees, subtracting the legal research expense.
I
[¶2] In February 2012, the parties executed four oil and gas leases. As a part
of those leases, the County received over $1.3 million in bonus payments. After
learning the County may not own all of the subject minerals, the Companies
sued the County for rescission, declaratory relief proclaiming the contract was
invalid based on lack of mutual assent, and unjust enrichment. The Companies
later amended the complaint, altering their declaratory relief claim to allege
that no valid contract was formed because the County did not publicly
advertise the leasing of the oil and gas as required by N.D.C.C. § 38-09-16
before executing the leases.
[¶3] After the parties filed cross motions for summary judgment, the district
court granted the Companies’ motion, concluding that the leases were void
because the County violated the statutory notice and bidding requirements and
that the County was unjustly enriched and its laches defense failed. The
County appealed. We affirmed the judgment, in part, concluding the leases
were invalid for violating the advertising requirements, and reversed and
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remanded the laches issue for further factual development. Twin City Tech.
LLC v. Williams Cty., 2019 ND 128, ¶¶ 14, 18, 927 N.W.2d 467.
[¶4] On remand, the district court granted the Companies’ motions to reset
the jury trial for a bench trial and to compel discovery and award expenses and
attorney’s fees against the County. After the bench trial, the court rejected the
County’s defenses of waiver, unclean hands, and laches and entered judgment
including an award of prejudgment interest to the Companies.
II
[¶5] The County argues the Companies failed to meet their burden of proof
on the unjust enrichment claim and, alternatively, waived the claim and have
unclean hands. The Companies assert the County is barred from challenging
the unjust enrichment claim and arguing waiver and unclean hands because
those issues were either not raised in the first appeal or were outside the scope
of our mandate on remand.
[¶6] “The law of the case doctrine applies when an appellate court has decided
a legal question and remanded to the district court for further proceedings, and
a party cannot on a second appeal relitigate issues which were resolved by the
Court in the first appeal or which would have been resolved had they been
properly presented in the first appeal.” Pennington v. Cont’l Res., Inc., 2021
ND 105, ¶ 9, 961 N.W.2d 264 (cleaned up). A more specific application of the
law of the case doctrine is the mandate rule. Id. at ¶ 10. “The mandate rule
requires the district court to follow the appellate court’s pronouncements on
legal issues in subsequent proceedings in the case and to carry the appellate
court’s mandate into effect according to its terms.” Id.
[¶7] In their summary judgment motion, the Companies argued they were
entitled to a judgment declaring no valid lease was formed and finding the
County was unjustly enriched by receiving the Companies’ bonus payments.
Although the County argued the Companies waived their right to contest the
County’s lease bidding process, the County did not argue the Companies
waived their unjust enrichment claim. The district court granted the
Companies’ summary judgment motion, concluding the leases were void
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because the County violated the statutory notice and bidding requirements,
and the County was unjustly enriched and its laches defense failed. Twin City
Tech., 2019 ND 128, ¶ 4.
[¶8] On appeal of the district court’s summary judgment, the County argued,
in relevant part, that it did not violate the statutory advertising requirements,
the Companies were barred from contesting the lease bidding process based on
waiver and laches, and the unjust enrichment process is unavailable when
parties have an express agreement. We affirmed the part of the court’s
judgment that concluded the leases were invalid for violating the advertising
requirements, and we reversed and remanded the laches issue. Twin City
Tech., 2019 ND 128, ¶¶ 14, 18. We noted the parties’ remaining arguments
were either unnecessary to our decision or without merit. Id. at ¶ 19. Thus, the
County failed to successfully challenge the unjust enrichment ruling in its
prior appeal, and the County’s present argument that the Companies failed to
meet their burden to prove unjust enrichment is barred by the law of the case
doctrine.
[¶9] The County contends we remanded for consideration of all of the parties’
equitable arguments, referencing the opening paragraph of the decision, which
states that we “remand for consideration of the parties’ equitable arguments
relating to the lease bonus payments.” Twin City Tech., 2019 ND 128, ¶ 1. The
County, however, disregards the discussion later on in the decision where we
exclusively address laches, id. at ¶¶ 15-18, and conclude “there are genuine
issues of material fact as to whether laches applies to bar the [Companies]’
claim for repayment of the bonuses,” id. at ¶ 18. The next sentence then
provides the more specific remand instruction, stating that we “remand for
proceedings related to whether the [Companies]’ delay in bringing their
lawsuit was unreasonable, and whether the County was prejudiced by the
delay.” Id. Our decision did not state the district court on remand was to
consider waiver or unclean hands.
[¶10] The County did not raise the defenses of waiver of the unjust enrichment
claim or unclean hands during summary judgment or on the first appeal.
Further, our prior decision made clear that we remanded to the district court
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for consideration of the County’s laches defense to the Companies’ claim for
repayment of the bonuses. Accordingly, the County was barred from raising
waiver and unclean hands on remand and is barred from raising them now on
appeal. See Pennington, 2021 ND 105, ¶ 17 (concluding that “[b]ecause a final
judgment was entered and reviewed on appeal, with this Court reversing and
remanding on a specific issue, the Plaintiffs are precluded from raising new
issues on remand”).
III
[¶11] The County argues the district court erred in finding laches did not bar
the Companies’ unjust enrichment claim. In the prior appeal, we discussed our
laches doctrine:
A stale claim may be barred by the equitable defense of
laches. Laches is a delay or lapse of time in commencing an action
that works a disadvantage or prejudice to the adverse party
because of a change in conditions during the delay. Laches does
not arise from a delay or lapse of time alone, but is a delay in
enforcing one’s rights which works a disadvantage to another. The
party against whom laches is sought to be invoked must be
actually or presumptively aware of his rights and must fail to
assert them against a party who in good faith permitted his
position to become so changed that he could not be restored to his
former state. The party invoking laches has the burden of proving
he was prejudiced because his position has become so changed
during the delay that he cannot be restored to the status quo.
Twin City Tech., 2019 ND 128, ¶ 16 (cleaned up). Generally, laches is a
question of fact. Bakken v. Duchscher, 2013 ND 33, ¶ 20, 827 N.W.2d 17. A
finding of fact is clearly erroneous if it is induced by an erroneous view of the
law, if no evidence exists to support the finding, or if, on the entire record, we
are left with a definite and firm conviction the district court made a mistake.
Id.[¶12] The district court found the Companies became aware of the title
concerns affecting the leased minerals in June 2013 when they received a letter
from Hess Corporation identifying “incurable title defects.” The court found the
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Companies notified the County in April 2015 when they sent a letter
requesting a return of the bonus payments, which the court calculated to be a
delay of 677 days. The County argues the district court erred in determining
the length of the delay in commencing the action. The County asserts the
Companies had constructive notice in 2012 of the title issues because of their
knowledge of the subject lands’ proximity to the Missouri River, contact with
Hess Corporation in 2012, and a due diligence period they were provided. The
County contends the end of the delay was not the April 2015 letter, but rather
the filing of the amended complaint in November 2016. Because the length of
delay in commencing suit is only material to the laches analysis if the adverse
party was prejudiced by the delay, we turn to the issue of prejudice.
[¶13] The County contends it was prejudiced by the Companies’ delay in
commencing the action because a witness passed away before it could elicit his
testimony. Specifically, the County argues Grant Archer represented the
Companies in negotiating the leases and was a crucial witness in this matter.
The county auditor testified that Archer’s mental status began declining in
2015 and worsened in 2017 and that he passed away in October 2018. The
County asserts Archer could have testified to the Companies’ role in the
bidding process, how he discovered the minerals were available to lease, and
any complications due to the minerals’ location. To the extent the County is
arguing Archer’s testimony would have been a defense to the statutory
advertising requirements, that argument is foreclosed by the law of the case
and the mandate rule. Additionally, the County fails to explain how Archer’s
testimony would be relevant to defending against the Companies’ unjust
enrichment claim.
[¶14] The Companies argue the county auditor is not a medical professional
competent to testify on Archer’s mental status and the County could have
attempted to depose Archer prior to his passing. The County does not dispute
that it never attempted to depose Archer, arguing instead that Archer’s
testimony wasn’t significant until the allegations in the amended complaint
were lodged in November 2016. However, even if that were the case, the
County had almost two years to depose Archer before his passing and failed to
do so. We conclude the County could not have been prejudiced by any delay in
5
the Companies commencing suit because Archer’s testimony was either
irrelevant to the prevailing claims in this case or not diligently pursued by the
County. Thus, if the County was prejudiced, it was a result of its own inaction.
[¶15] The County also argues the Companies’ delay in bringing suit prejudiced
it financially because it spent the bonus payments on constructing a county
building. The County asserts that if the Companies had not delayed bringing
suit, it would not have spent the bonus payments. The district court, however,
found the building project was approved before the County received the bonus
payments and was not dependent on the bonus payments for completion. The
court found the County spent the bonus payments at least by the end of August
2012, and thus there was no change in the County’s position from August 2012
to 2015, when the Companies filed suit.
[¶16] The County contends that the building project was still “fluid” after
receiving the bonus payments and that in April 2012 certain project features
were still being decided and depended on the bonus payments. The record does
not support the County’s contention. The County’s April 2012 meeting minutes
show the County considered bids for the building project, determined the
project would cost $5.3 million, and agreed the money would be “found
somewhere.” After approving the project bids, the meeting minutes note that
money had been set aside in a separate fund consisting of “crew housing permit
fees and oil leases.” The district court found there was no evidence that even if
the Companies had discovered the title defects immediately after signing the
leases and notified the County, the County would have forgone or scaled back
the building project.
[¶17] The County also argues that although funds are available in its general
fund, those funds are a part of the budget and are earmarked for specific
expenditures. The County asserts that for it to repay the bonuses, it would
have to tax its citizens or cut funding to a project or program. However, the
county’s finance director testified the County could take out a loan to pay for a
project. Moreover, the county auditor testified that for budget year 2015 the
County had about $18 million in its general fund allocated to a budget and
about $20 million unallocated in its general fund. The court found the County
6
had adequate unallocated funds in its general fund at all times from the end
of 2012 to the end of 2015.
[¶18] On the basis of its findings, the district court concluded laches did not
apply. We conclude the district court’s findings are not clearly erroneous, and
it did not err by concluding laches did not bar the Companies’ unjust
enrichment claim.
IV
[¶19] The district court awarded the Companies prejudgment interest on their
unjust enrichment claim dating back to September 30, 2015. The County
argues the court abused its discretion by not starting prejudgment interest
from the date of filing the amended complaint, November 8, 2016, which first
included the advertising violation claim.
[¶20] The district court awarded prejudgment interest under N.D.C.C. § 32-
03-05, which provides, “In an action for the breach of an obligation not arising
from contract . . . interest may be given in the discretion of the court . . . .” A
court has broad discretion under N.D.C.C. § 32-03-05 in determining whether
to award prejudgment interest. Gonzalez v. Tounjian, 2003 ND 121, ¶ 37, 665
N.W.2d 705. A court abuses its discretion if it acts in an arbitrary,
unreasonable, or unconscionable manner; if its decision is not the product of a
rational mental process leading to a reasoned determination; or if it
misinterprets or misapplies the law. Id.[¶21] The Companies are entitled to recover the bonus payments on the basis
of their unjust enrichment claim. The parties do not dispute the amount of the
bonus payments ($1,314,506.80) and, therefore, the amount the County was
unjustly enriched. Further, the district court found the Companies paid the
bonus payments to the County in March 2012, which the parties stipulated
was an undisputed fact. Thus, the County was unjustly enriched in the amount
of $1,314,506.80 by no later than the end of March 2012.
[¶22] Additionally, the district court found the County was put on notice of the
potential title issues in April 2015, when the Companies sent a letter to the
7
County. The letter stated, in part, the Companies learned from Hess
Corporation that the County did not own any interest in the subject minerals,
the County’s solicitation of bids to lease the interests was presumably a
mistake, and the Companies requested the return of the bonus payments if the
County did not have a basis for claiming ownership of the minerals. In
September 2015, the Companies sued the County for rescission, declaratory
relief proclaiming the contract was invalid based on lack of mutual assent, and
unjust enrichment. In November 2016, the Companies amended their
complaint to allege the contract was invalid due to the advertising violation,
instead of a lack of mutual assent. Despite this amendment, however, the
County was already on notice from the April 2015 letter and original complaint
that the Companies alleged it did not own the subject minerals and the
Companies were requesting the County refund the bonus payments. We
conclude the district court did not abuse its discretion by starting prejudgment
interest on September 30, 2015.
V
[¶23] The County argues the district court erred when it ordered a bench trial,
rather than a jury trial.
[¶24] “Whether a party is entitled to a jury trial depends upon whether the
case is an action at law or an action in equity.” First Nat’l Bank & Tr. Co. of
Williston v. Brakken, 468 N.W.2d 633, 635 (N.D. 1991). “In an equitable
proceeding there is no absolute right to a trial by jury.” Barker v. Ness, 1998
ND 223, ¶ 6, 587 N.W.2d 183. Laches is an equitable defense. Stenehjem ex rel.
State v. Nat’l Audubon Soc’y, Inc., 2014 ND 71, ¶ 15, 844 N.W.2d 892. Because
there is no absolute right to a jury trial in this case, whether to try the laches
issue before an advisory jury was within the court’s discretion. N.D.R.Civ.P.
39(c)(1). The district court found an advisory jury would add unnecessary
expense, time, and complexity. The court did not abuse its discretion by holding
a bench trial on the equitable defense of laches.
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VI
[¶25] The County argues the district court abused its discretion in granting
the Companies’ motion to compel discovery because the Companies failed to
confer in good faith and because the Companies’ contention interrogatories
sought protected materials. We review an order compelling discovery under
the abuse of discretion standard. PHI Fin. Servs., Inc. v. Johnston Law Office,
P.C., 2016 ND 114, ¶ 9, 881 N.W.2d 216.
[¶26] A party moving for an order compelling discovery must certify that it
“has in good faith conferred or attempted to confer with the person or party
failing to make discovery in an effort to obtain it without court action.”
N.D.R.Civ.P. 37(a)(1). We have discussed the “good faith” requirement under
the federal rule:
“Good faith” under [Fed.R.Civ.P. 37(a)(1)] contemplates, among
other things, honesty in one’s purpose to meaningfully discuss the
discovery dispute, freedom from intention to defraud or abuse the
discovery process, and faithfulness to one’s obligation to secure
information without court action. “Good faith” is tested by the
court according to the nature of the dispute, the reasonableness of
the positions held by the respective parties, and the means by
which both sides conferred. Accordingly, good faith cannot be
shown merely through the perfunctory parroting of statutory
language on the certificate to secure court intervention; rather it
mandates a genuine attempt to resolve the discovery dispute
through non-judicial means.
PHI Fin. Servs., 2016 ND 114, ¶ 11 (quoting Shuffle Master, Inc. v. Progressive
Games, Inc., 170 F.R.D. 166, 171 (D. Nev. 1996)). Whether a party acted in
good faith under N.D.R.Civ.P. 37(a)(1) is a question of fact, which we review
under the clearly erroneous standard. PHI Fin. Servs., at ¶ 12.
[¶27] The Companies made a written discovery request to the County to
answer a series of interrogatories. The County objected to interrogatories
numbered 13-15. After receiving the objections, the Companies’ attorney wrote
a letter to the County’s attorney providing the Companies’ reasoning as to why
he believed the objections were without merit and requested that the County
9
answer the interrogatories. The County’s attorney responded, further
explaining his objections. Following the County’s letter, the Companies moved
to compel discovery. The district court found that although the Companies did
not make an “exhaustive effort,” they made a good-faith effort to confer with
the County.
[¶28] The County argues the Companies did not confer in good faith and
asserts the parties in PHI Financial Services communicated several times, via
both written correspondence and telephone. In PHI Financial Services, we
upheld the district court’s finding that the movant, in good faith, attempted to
confer with the opposing party before moving to compel discovery. 2016 ND
114, ¶ 13. The only additional communication in PHI Financial Services was
the movant’s unanswered voicemail. Id. at ¶¶ 4, 13. We conclude the district
court did not clearly err by finding the Companies made a good-faith effort to
confer with the County.
[¶29] The County contends interrogatories 13-15 sought protected materials
in the form of legal opinions and conclusions. Those interrogatories provided:
Interrogatory No. 13: Identify and describe all the facts or
circumstances that you contend support your argument that the
defense of laches bars Plaintiffs from recovering the value of the
bonus payments.
Interrogatory No. 14: Identify and describe how Williams County
will be prejudiced or disadvantaged by having to return the bonus
payments.
Interrogatory No. 15: Identify the start date and end date for the
period of delay you contend supports your defense of laches.
[¶30] The County provides no legal support for its argument. The Companies
assert these were contention interrogatories, expressly contemplated by
N.D.R.Civ.P. 33(a)(2), which provides, “An interrogatory is not objectionable
merely because it asks for an opinion or contention that relates to fact or the
application of law to fact . . . .” The district court found the interrogatories were
not requesting any statement, document, or tangible thing prepared in
anticipation of litigation and thus were not requesting attorney work product.
10
We conclude the County has failed to show that these interrogatories require
it to disclose attorney work product or otherwise violate a rule of discovery.
Accordingly, the court did not abuse its discretion in compelling discovery.
VII
[¶31] The County argues the district court abused its discretion in awarding
the Companies their expenses and attorney’s fees incurred in moving to compel
discovery. The County contends some of the attorney’s fees and expenses
awarded were unreasonable.
[¶32] If a motion to compel discovery is granted, the court must award
reasonable expenses, including attorney’s fees, unless an exception applies.
N.D.R.Civ.P. 37(a)(5)(A). A district court is “considered an expert in
determining the amount of attorney fees,” and “[i]ts decision concerning the
amount and reasonableness of the attorney’s fees will not be overturned on
appeal absent a clear abuse of discretion.” Riemers v. State, 2008 ND 101, ¶ 8,
750 N.W.2d 407.
[¶33] The County argues that the rates of two shareholders in the law firm
representing the Companies were excessive and that their work was
redundant or duplicative of the associate attorneys at the law firm, noting the
review and preparation time spent by the shareholders. The County, however,
does not provide any legal or factual support for the rates being excessive or
for relatively modest review and preparation work performed by the
shareholders being unreasonably duplicative or redundant. The Companies’
attorneys expended 25.70 hours drafting the motion to compel and its
supporting documents, researching the issues, and preparing for and
participating in the hearing on the motion, amounting to $6,780.50 in
attorney’s fees. See N.D. Dep’t of Transp. v. Schmitz, 2018 ND 113, ¶ 6, 910
N.W.2d 874 (“The number of hours spent in total and the rate per hour are the
predominant factors in determining reasonable attorney fees.”). We conclude
the district court did not abuse its discretion in concluding the attorney’s fees
were reasonable.
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[¶34] The County also asserts the court improperly awarded the Companies’
legal research (Westlaw) expense. “[E]lectronic legal research fees are a
component of attorney fees and cannot be separately taxed as costs.” Heng v.
Rotech Med. Corp., 2006 ND 176, ¶ 37, 720 N.W.2d 54. The Companies listed
“Research via Westlaw” for $420 under the heading “Costs and Other
Charges.” Because the legal research was separately taxed as costs, as opposed
to being a component of attorney’s fees, we modify the district court order
awarding expenses and attorney’s fees under N.D.R.App.P. 35(a)(1) to subtract
the legal research expense of $420 from the award of $7,204.55.
VIII
[¶35] We affirm the judgment, and orders granting a bench trial and
compelling discovery, and modify the order awarding expenses and attorney’s
fees, subtracting the legal research expense.
[¶36] Jon J. Jensen, C.J.
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
I concur in the result.
Gerald W. VandeWalle
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