United States v. State of Ohio, 787 F.3d 350

Background

In 1948 the U.S. Army Corps of Engineers and Ohio entered into a cost‑sharing Articles of Agreement to build and operate Tom Jenkins Dam and Burr Oak Reservoir; the Corps’ Project Report and a later Planning Report required Ohio to acquire "necessary" lands, including coal below specified elevations, because reservoir operation would prevent mining.
The Agreement incorporated the Corps’ plans and contemplated Ohio would "retain" most Project lands (subsurface interests included) while the United States would hold title to certain dam parcels; Ohio had to follow a land‑acquisition program approved by the Corps.
A 1962 quitclaim deed transferred to Ohio lands the United States had acquired for the Project; the deed expressly referenced and was delivered "in compliance with and furtherance of" the original Agreement.
In 2010 Ohio leased subsurface coal rights under Project lands to Buckingham Coal to allow a mining corridor and sale of extracted coal; the Corps demanded cessation pending review, but Ohio and Buckingham proceeded after receiving a state license.
The United States sued seeking a declaration that the Agreement and Corps planning documents preclude Ohio (or its lessees) from mining Project lands without prior Corps approval; the district court denied the United States’ summary judgment and granted Ohio’s and Buckingham’s.
The Sixth Circuit reversed, holding the Agreement and Planning Report required Ohio to retain coal interests and obtain the Corps’ prior approval before disposing of them, and the 1962 quitclaim did not supersede those contractual obligations.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Articles of Agreement and Corps planning documents preclude Ohio from leasing/disposing of subsurface coal interests in Project lands without Corps approval	The Agreement and Planning Report required Ohio to acquire and retain all "necessary" lands (including coal beneath elevation thresholds) and forbid sale/disposal without prior District Engineer approval	The Agreement does not explicitly address subsurface mineral rights; Ohio contends it may lease coal so long as mining does not adversely affect the Project and claims the later quitclaim deed freed it from prior restrictions	Held for U.S.: The documents required Ohio to acquire and retain coal interests and obtain prior Corps approval before disposing of them; Ohio lacked authority to lease the coal
Whether "land" in the Agreement/Planning Report includes subsurface mineral rights such that leasing coal is a "disposal" requiring prior approval	"Land" includes the space above and below the surface and interests in real property, so subsurface coal rights are covered	Ohio argued "disposal" referred only to surface parcels and that leasing coal is not disposal of "lands"	Held for U.S.: "Land" includes subsurface mineral rights; leasing coal constituted disposal requiring prior approval
Whether the 1962 quitclaim deed merged away or superseded the Agreement/Planning Report (merger-by-deed)	Buckingham/Ohio: The quitclaim conveyed coal to Ohio and, under merger‑by‑deed principles, extinguished prior contractual limits	U.S.: The quitclaim expressly referenced the Agreement and was intended to put parties in the originally contemplated position, not to abrogate continuing contractual obligations	Held for U.S.: Merger‑by‑deed does not apply because the parties intended the Agreement to continue and the deed expressly references compliance with it
Whether Buckingham, as lessee, is protected as a bona fide purchaser for value without notice	Buckingham argued its leaseholder rights cannot be extinguished because no recorded encumbrance gave notice	U.S.: A lessee is not a bona fide purchaser for value under Ohio law; recordation argument fails	Held for U.S.: Buckingham is not a bona fide purchaser; lease is not protected

Key Cases Cited

Yellowbook Inc. v. Brandeberry, 708 F.3d 837 (6th Cir.) (standard of review for summary judgment)
Erie R. Co. v. Tompkins, 304 U.S. 64 (federal courts apply state law in non‑federal questions)
City of St. Marys v. Auglaize Cnty. Bd. of Comm’rs., 115 Ohio St. 3d 387 (Ohio) (contract interpretation is a question of law)
Sunoco, Inc. v. Toledo Edison Co., 129 Ohio St. 3d 397 (Ohio) (give effect to parties’ intent; clear contract language controls)
Westfield Ins. Co. v. Galatis, 100 Ohio St. 3d 216 (Ohio) (definition of unambiguous contract language)
Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (federal courts may borrow state law where appropriate)
Bituminous Cas. Corp. v. Lynn, 503 F.2d 636 (6th Cir.) (general contract law principles apply absent contrary congressional standard)
Villa v. Rodriguez, 79 U.S. 323 (Supreme Court) (lessees are not bona fide purchasers for value in this context)