ARKANSAS OIL & GAS COMMISSION; LAWRENCE BENGAL, IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE ARKANSAS OIL & GAS COMMISSION; W. FRANK MORLEDGE, MIKE DAVIS, LEE DAWKINS, JERRY LANGLEY, JIM PHILLIPS, CHRIS WEISER, TIMOTHY SMITH, CHARLES WOHLFORD, AND THOMAS MCWILLIAMS, IN THEIR OFFICIAL CAPACITIES AS COMMISSIONERS OF THE ARKANSAS OIL & GAS COMMISSION; AND SWN PRODUCTION (ARKANSAS), LLC, APPELLANTS/CROSS-APPELLEES v. J.R. HURD; SARA SMITH HURD; PATRICIA HURD MCGREGOR; VICTORIA HURD GOEBEL; DAVID W. KILLAM; ADRIAN KATHLEEN KILLAM; TRACY LEIGH KILLAM-DILEO; HURD ENTERPRISES, LTD.; AND KILLAM OIL CO., LTD., APPELLEES/CROSS-APPELLANTS
No. CV-18-223
SUPREME COURT OF ARKANSAS
December 20, 2018
2018 Ark. 397
ROBIN F. WYNNE, Associate Justice
APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SIXTH DIVISION [NO. 60CV-17-3961] HONORABLE TIMOTHY DAVIS FOX, JUDGE REVERSED AND REMANDED ON DIRECT APPEAL AND ON CROSS-APPEAL.
I. Background
Appellees are the owners/lessors and lessees of mineral interests in Sections 25 and 36, Township 9 North, Range 11 West, Cleburne County, Arkansas. The mineral interests at issue, which lie in the Moorefield Shale Formation (below the Fayetteville Shale Formation), are integrated into SWN‘s drilling units by virtue of integration orders issued by the AOGC in March 2017. SWN subsequently filed supplemental applications with
On July 28, 2017, appellees filed a petition for review in the Pulaski County Circuit Court pursuant to the APA,
On January 18, 2018, this court issued a decision concerning the doctrine of sovereign immunity in Board of Trustees of the University of Arkansas v. Andrews, 2018 Ark. 12, 535 S.W.3d 616. On January 21, 2018, the AOGC filed a motion to dismiss the petition for review for lack of subject-matter jurisdiction. The AOGC argued that, under Andrews, it has sovereign immunity from suit in this matter and that the action should be dismissed. Appellees filed a response the following day, on which a hearing was scheduled, arguing that the complaint stated a valid claim for an ultra vires and illegal act that was not subject to the sovereign immunity doctrine. At the hearing, the circuit court considered the parties’ arguments regarding sovereign immunity as set out in the motion to dismiss and response, allowed the parties to make any further arguments for the record, and announced its decision to grant the AOGC‘s motion to dismiss and declare the orders that were the subject of the petition for review void ab initio and of no force and effect. In its February 12, 2018 order, the circuit court wrote:
On January 22, 2018, came on for hearing the motion to dismiss of separate Respondents, the Arkansas Oil & Gas Commission, Lawrence Bengal, W. Frank Morledge, Mike Davis, Lee Dawkins, Jerry Langley, Jim Phillips, Chris Weiser, Timothy Smith, Charles Wohlford and Thomas McWilliams (“Agency Respondents“) and the response of the petitioners, J.R. Hurd, Sara Smith Hurd, Patricia Hurd McGregor, Victoria Hurd Goebel, David W. Killam, Adrian Kathleen Killam, Tracy Leigh Killam-Dileo, Hurd Enterprises, Ltd., and Killam Oil Co., Ltd.
(“Petitioners“), and from the pleadings and the arguments of the parties, the Court hereby finds and concludes as follows:
- On January 22, 2018, the Agency Respondents filed a Motion to Dismiss based upon the recent decision of the Arkansas Supreme Court in the case of Board of Trustees of the University of Arkansas v. Andrews, Supreme Court Case Number CV - 17-168 issued on January 18, 2018. Petitioners responded to the motion the same day.
- The Andrews case did not specifically address the interaction of
Article 2, Section 13 of the Arkansas Constitution about whether the State had waived sovereign immunity, or to what extent sovereign immunity andArticle 2, Section 13 might work together.- In this administrative appeal the Court has seen nothing that the State has done that would constitute a fact-based waiver of sovereign immunity. As soon as reasonably possible after the Supreme Court announced a sea change in the parameters of sovereign immunity, the Agency Respondents brought the issue of sovereign immunity to the Court‘s attention and addressed it in a motion to dismiss. In the event that was something left open in the Andrews case, it is not open in this case.
- Both
Article 2, Section 13 of the Arkansas Constitution and the due process clause of theUnited States Constitution require both a procedural and a substantive remedy for every alleged injury, wrong, or taking.- This matter is not an original action. It is an administrative appeal under the adjudicatory provisions of the Arkansas Administrative Procedures Act. The adjudicatory provisions are not the entire act. The specific statutes are
Ark. Code Ann. §§ 25-15-206 ,207 ,208 ,209 ,210 ,212 ,213 , and214 . Those statutes together create a specific, seamless adjudicatory framework that has always satisfied the procedural and substantive requirements of due process because there was an administrative provision, and then there was an opportunity to appeal. By statute, the appeal of an agency decision was to circuit court for any party who felt aggrieved by an agency‘s administrative action. The General Assembly, in the Administrative Procedures Act, specifically legislated inA.C.A. § 25-15-214 that any appeal of an agency decision must go to circuit court.The Court is not aware of any statutory authority allowing any administrative appeals to be heard by the Arkansas State Claims Commission. Ark. Code Ann. § 19-10-204(b)(2)(A) does give the Claims Commission jurisdiction over claims which are barred by the doctrine of sovereign immunity from being litigated in a court of general jurisdiction. But as previously noted, the present matter is not an original claim; it is an administrative appeal that is part of a seamless process set up by the General Assembly.- To the extent that the Arkansas Supreme Court‘s decision in Andrews is applicable to administrative appeals under the Arkansas Administrative Procedures Act, the adjudicatory provisions of the Arkansas Administrative Procedures Act are now violative of
Article 2, Section 13 of the Arkansas Constitution and violative of the due process clause of theUnited States Constitution until such time as the General Assembly can meet and amend the APA to be in conformity with both the Andrews case,Article 2, Section 13 , and the due process clause.- The Defendants’ Motion to Dismiss is granted with prejudice, and this case is dismissed.
Ark. Code Ann. §§ 25-15-206 ,207 ,208 ,209 ,210 ,212 ,213 , and214 that are the adjudicatory provisions of the Arkansas Administrative Procedures Act are declared to be unconstitutional as written under the Andrews case because of the Arkansas Supreme Court‘s decision in Andrews. This means that the orders that are the subject of the petition for review are void ab initio. They are null and void as if they had never been entered.- Petitioners’ petition for review also alleged jurisdiction under
Ark. Code Ann. § 15-72-110 . Petitioners have also argued that the Andrews case noted that “acting illegally” is an exception to sovereign immunity and that the whole issue on appeal is that the Agency Respondents were without statutory authority to rule as they did, making the orders appealed from ultra vires. They further argue that the Arkansas Supreme Court in Andrews did not overrule that exception. To that extent, the Court grants the Agency Respondеnts’ Motion to Dismiss that they were not acting illegally, that they were not acting ultra vires, based upon the pleadings that the Court read. The Court makes a fact-based determination that there is no indication in the appeal record that the Agency Respondents were acting ultra vires, illegally, or without authority of law. The Court declines each of the Petitioners’ individual arguments to the extent that the Court hasn‘t granted any of them. Dobson v. Oil and Gas Commission case, 218 Ark. 160, 235 S.W.2d 33 (1950), cited by the Petitioners, has been overruled by implication with the Andrews case.Petitioners also argued in their petition for review and in their response to Respondents’ motiоn to dismiss that their property rights are affected by the orders that are the subject of the petition for review. Petitioners cite Article 2, Section 13 , as a further ground for their petition for review and as an exception to the Court‘s reading of the holding in Andrews. The Court agrees that property rights are involved. However, without the Supreme Court specifically addressing the interplay of sovereign immunity andArticle 2, Section 13 , as a trial judge, the Court concludes based on its reading of Andrews that if the sovereign immunity clause of the constitution andArticle 2, Section 13 are read together, theArticle 2, Section 13 applies to everything and everybody unless the matter is a party against the State of Arkansas and then the sovereign immunity clause means the State of Arkansas cannot be brought into court.- Based on Andrews and the lack of a right of review of Respondents’ orders, the Court concludes that there is a clear violation of both procedural and substantive due process.
- The Court is not making a decision about the factual elements of the parties’ arguments, other than the Agency Respondents’ actions were not ultra vires. If the case is remanded and the Court has jurisdiction, the Court will allow the parties to make further arguments on other issues raised.
- This leaves the parties to those сontracts at issue in the order back talking to each other and puts the Arkansas Oil and Gas Commission out of adjudicatory business until something is resolved by the Arkansas Supreme Court, or the General Assembly addresses the issue.
- The Court‘s oral ruling and the bases therefor are incorporated herein.
- SWN Production (Arkansas), LLC is made a party respondent herein.
IT IS THEREFORE ORDERED that the Agency Respondents’ motion to dismiss is granted with prejudice, that the orders that are the subject of the petition for review of J.R. Hurd, Sara Smith Hurd, Patricia Hurd McGregor, Victoria Hurd Goebel, David W. Killam, Adrian Kathleen Killam, Tracy Leigh Killam-Dileo, Hurd Enterprises, Ltd., and Killam Oil Co., Ltd., are void ab initio and of no force and effect, and that Petitioners’ petition for review is dismissed.
II. Direct Appeal
On appeal, the AOGC argues that the circuit court correctly held that the petition for review was barred by sovereign immunity but erred by invalidating the APA‘s adjudicatory provisions and AOGC‘s orders. The AOGC contends that after holding that the petition was barred by sovereign immunity, the circuit court lacked jurisdiction to do anything but dismiss the petition. Further, the AOGC argues that even if thе circuit court‘s sovereign-immunity analysis was incorrect, the court‘s award of substantive relief must still be reversed because the circuit court‘s basis for declaring provisions of the APA unconstitutional and voiding AOGC‘s administrative orders would no longer exist. In its brief, separate appellant SWN argues that judicial review of state administrative actions is not barred by the Andrews decision for several reasons, and that even if the circuit court‘s sovereign-immunity ruling is affirmed, the substantive rulings of the circuit court must be reversed. Appellees respond by arguing that judicial review of an agency action under the APA is not unconstitutional; judicial review of an agency action alleged to be ultra vires is not unconstitutional; and the AOGC exceeded its authority, i.e., acted in an ultra vires manner. Accordingly, all parties agree that the circuit court‘s order should be reversed insofar as it declared the adjudicatory portions of the APA unconstitutional.
In Andrews, this court held that that the General Assembly cannot waive the State‘s immunity pursuant to
Now, the question before this court is whether
Pursuant to the APA, “[i]n cases of adjudication, any person . . . who considers himself or herself injured in his or her person, business, or property by final agency action shall be entitled to judicial review of the action under this subchapter.”
(g) The review shall be conducted by the court without a jury and shall be confined to the record, except that in cases of alleged irregularities in procedure before the agency not shown in the record, testimony may be taken before the court. The court shall, upon request, hear oral argument and receive written briefs.
(h) The court may affirm the decision of the agency or remand the casе for further proceedings. It may reverse or modify the decision if the substantial rights of the petitioner have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
- In violation of constitutional or statutory provisions;
- In excess of the agency‘s statutory authority;
- Made upon unlawful procedure;
- Affected by other error or law;
- Not supported by substantial evidence of record; or
- Arbitrary, capricious, or characterized by abuse of discretion.
In all proceedings brought under authority of this act, of any oil or gas conservation statute of this state, or оf any rule, regulation, or order issued thereunder and in all proceedings instituted for the purpose of contesting the validity of any provision of the act, of any oil or gas conservation statute, or of any rule, regulation, or order issued thereunder, appeals may be taken in accordance with the general laws of the State of Arkansas relating to appeals.
The present case is distinguishable from Andrews and other recent cases concerning sovereign immunity because it concerns an appeal of an agency adjudication. The AOGC is a named defendant, but its role in the proceeding is that of a tribunal or a quasi-judicial decision-maker rather than a real party in interest. It is akin to a trial court in an appellate
Because the circuit court erred in concluding that the doctrine of sovereign immunity barred its consideration of the petition for review of the AOGC orders, it follows that the rulings declaring the adjudicatory provision of the APA unconstitutional and the AOGC‘s orders void ab initio must also be reversed. Accordingly, we reverse the
III. Cross-Appeal
On cross-appeal, appellees/cross-appellants argue that the AOGC exceeded its authority. Essentially, their argument is that none of the statutes cited by the AOGC actually provide a sufficient basis for the AOGC‘s asserted jurisdiction over the royalty SWN must pay the royalty owners. Alternatively, they argue that this court should remand for full consideration of whether the AOGC exceeded its authority. We agree with the alternative argument, and for the reasons outlined above, remand to the circuit court for consideration of the petition for review in accordance with the APA.
IV. Conclusion
Reversed and remanded on direct appeal and on cross-appeal.
HART, J., concurs.
WOOD and WOMACK, JJ., concur in part and dissent in part.
BAKER, J., dissents.
We cannot keep doing this. The Andrews decision was improvident for its profound lack of any actual constitutional analysis. See Arkansas Community Correction v. Barnes, 2018 Ark. 122, 542 S.W.3d 841 (Hart, J., dissenting). The notion that the drafters of our
RHONDA K. WOOD, Justice, concurring and dissenting. I concur with the result on direct appeal. Sovereign immunity is not applicable in a petition for review from an agency decision. For the following reasons, however, I must respectfully dissent from the majority‘s decision to remand the cross-appeal.
The cross-appeal concerns an issue of statutory interpretation that was fully briefed to the circuit court and on appeal. The circuit court ruled on the issue, albeit without explanation. And on appeal, the parties unanimously entreat this court to rule on the merits without rеmanding.1 Procedurally, remanding the cross-appeal here accomplishes no more than eliciting a more detailed legal interpretation that we will ultimately afford no deference. E.g., Dep‘t of Ark. State Police v. Keech Law Firm, P.A., 2017 Ark. 143, at 2, 516 S.W.3d 265, 267; State v. Thomas, 2014 Ark. 362, at 4, 439 S.W.3d 690, 692 (explaining that we give no deference to the circuit court‘s statutory interpretation). In practicality,
The majority opinion implies that the circuit court only made a factual determination, not a legal one. But the opposite is true. Although the circuit court factually reviewed the administrative record, as the majority cites, it did not decide any facts. The order expressly stated that it “is not making a decision about the factual elements of the parties’ arguments, other than the Agency Respondents’ actions were not ultra vires.” But the ultra-vires issue is purely a matter of statutory interpretation. There are simply no factual issues at play.
The сircuit court plainly and repeatedly stated it was denying the appellees’ legal argument in their petition for review. The court concluded, both on the record and in its order, that the AOGC did not act “ultra vires, illegally, or without authority of law.” The parties agree that there are no material facts in dispute. They also agree that the appellees’ petition for review sought only a legal determination regarding the scope of the AOGC‘s statutory authority. After appellees specifically requested that the circuit court rule on the ultra-vires issue, the court stated in its written order,
Petitioners have also argued that the Andrews case noted that “acting illegally” is an exception to sovereign immunity and that the whole issue on appeal is that the Agency Respondents were without statutory authority to rule as they did, making the orders appealed from ultra vires. . . . To that extent, the Court grants the
Agency Respondents’ Motion to Dismiss that they were not acting illegally, that they were not acting ultra vires, based upon the pleadings that the court read.
(Emphasis added.) Finally, the circuit court‘s order “declines each of the Petitioners’ individual arguments to the extеnt the Court hasn‘t granted any of them.” This resulted in a final order. By granting the State‘s motion to dismiss as to the merits of the petitioners’ underlying claim, the circuit court issued a final ruling on the matter of law that was the only issue in the matter.
Despite all of this, the majority finds “the circuit court‘s order to be ambiguous such that a remand is necessary to ensure that appellees’ arguments—which are based on statutory interpretation—are considered.” Yet, it is unclear what will be accomplished on remand. The issue was briefed below, the circuit court is not required to hold a hearing, and the court is not required to make specific findings on a matter of statutory interpretation. In fact, the circuit court could conceivably enter a one-sentence order on remand, simply stating again that the AOGC did not act “ultra vires, illegally, or without authority of law.”
The issue on cross-appeal is purely a matter of statutory interpretation, which is ultimately for this court to decide. See Brock v. Townsell, 2009 Ark. 224, at 9, 309 S.W.3d 179, 185. While remand may afford the circuit court an opportunity to clarify any ambiguities in its order and consider its interpretation further, such clarification and interpretation becomes immediately inconsequential in the subsequent appeal. Id.
For the sake of judicial economy, I dissent.
WOMACK, J., joins in this opinion.
KAREN R. BAKER, Justice, dissenting. Because I cannot agree that the circuit court erred in its application of the precedent established in Board of Trustees of Univ. of Arkansas v. Andrews, 2018 Ark. 12, 535 S.W.3d 616, I dissent from the majority opinion. Although the majority distinguishes this appeal from Andrews and holds that sovereign immunity does not apply, this analysis contradicts Andrews. Here, the majority explains:
The present case is distinguishable from Andrews and other recent cases concerning sovereign immunity because it concerns an appeаl of an agency adjudication. The AOGC is a named defendant, but its role in the proceeding is that of a tribunal or a quasi-judicial decision-maker rather than a real party in interest. It is akin to a trial court in an appellate proceeding; it has no vested interest in the outcome of the appeal other than whether its decision is upheld. The subject of the adjudication-the amount of royalty to be paid by SWN to the appellees-does not affect the State‘s coffers or control its actions. See Duit Constr. Co., Inc. v. Ark. State Claims Comm‘n, 2015 Ark. 462, at 5, 476 S.W.3d 791, 795 (“In determining whether the doctrine of sovereign immunity applies, the court must decide if a judgment for the plaintiff will operate to control the action of the State or subject it to liability.“). Appellees sought judicial review of the AOGC‘s final agency action; they alleged no additional claims against the AOGC or any other state actor. Under these circumstances, sovereign immunity is not implicated because the AOGC is not “made a defendant” as contemplated by article 5, section 20, of the Arkansas Constitution. There is no need to address “exceptions” to sovereign immunity because the doctrine simply doеs not apply in this case.
This analysis contradicts Andrews for several reasons. First, in Andrews the court held,
[W]e interpret the constitutional provision, “The State of Arkansas shall never be made a defendant in any of her courts,” precisely as it reads. The drafters of our current constitution removed language from the 1868 constitution that provided the General Assembly with statutory authority to waive sovereign immunity and instead used the word “never.” See Ark. Const. of 1868, art. 5, § 45; Ark. Const. art. 5, § 20. The people of the state of Arkansas approved this change when ratifying the current constitution.
Andrews, 2018 Ark. 12, at 10-11, 535 S.W.3d at 622.
Stated differently, in Andrews, the court held that “never means never,” therefore this suit is barred based on the broad language in Andrews.
Second, despite the majority holding that the sovereign immunity “doctrine simply does not apply in this case“—this is also inapposite of Andrews because Andrews did not identify exceptions, exemptions or the like. Again, the State may never be sued.
Third, the majority‘s position that sovereign immunity does not apply because the suit “does not affect the State‘s coffers or control its actions,” is misplaced as well. As I explained in my dissent in Andrews, “Absent from our constitution is any language limiting sovereign immunity to money judgments.” Andrews, 2018 Ark. 12, at 14, 535 S.W.3d at 624 (Baker, J., dissenting). Therefore, this does not support the majority‘s position that sovereign immunity “simply does not apply in this cаse.”
Finally, the majority‘s opinion is inconsistent with Andrews because actions by the State are at issue in this case. Although the majority explains that—“the AOGC is a named defendant, but its role in the proceeding is that of a tribunal or a quasi-judicial decision-maker rather than a real party in interest“—and that “it has no vested interest in the outcome of the appeal other than whether its decision is upheld,” this is not the standard
Accordingly, I dissent.
Leslie Rutledge, Att‘y Gen., by: Lee Rudofsky, Solicitor Gen.; Jennifer L. Merritt, Sr. Ass‘t Att‘y Gen.; Monty V. Baugh, Ass‘t Att‘y Gen.; and Kesia Morrison, Ass‘t Att‘y Gen., for State appellant/cross-appellee.
PPGMR Law, PLLC, by: G. Alan Perkins and Kimberly D. Logue, for SWN Production (Arkansas), LLC, appellant/cross-appellee.
Friday, Eldredge & Clark, LLP, by: William A. Waddell, Jr., Robert S. Shafer, and Joshua C. Ashley; and Morgan Law Firm, P.A., by: M. Edward Morgan, for appellees/cross-appellants.