Oxy Usa, Inc. v. BabbittOxy Usa, Inc. v. Babbitt
Sean H. Donahue (Lois J. Schiffer, Assistant Attorney General; Peter Coppelman, Acting Assistant Attorney General; William B. Lаzarus, Donna S. Fitzgerald and Robert L. Klarquist, Department of Justice, with him on the briefs) of the Department of Justice, Washington, D.C., for Defendants-Appellants.
David L. Bryant, of Bryant Law Firm PLLC, Tulsa, Oklahoma, filed a brief for amicus curiae Union Oil Company of California.
Michael E. Smith and Sharon Taylor Thomas of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, Oklahoma, filed a brief for amici curiae Independent Petroleum Association of America, and National Mining Association.
Victor E. Schwartz, Timothy M. Biddle, Mark A. Behrens, and Donald J. Kochan, of Crowell & Moring LLP, Washington, D.C., filed a brief for amici curiae American Chemistry Council (David F. Zoll and Donald D. Evans, Arlington, Virginia, of counsel on the brief); American Petroleum Institute (G. William Frick, Washington, D.C., of counsel оn the brief); Chamber of Commerce of the United States (Stephen A. Bokat of National Chamber Litigation Center, Inc., Washington, D.C., of counsel on the brief); American Tort Reform Association (Sherman Joyce, Washington, D.C., of counsel on the brief); National Association of Manufacturers (Jan S. Amundson, Washington, D.C., of counsel on the brief); and Lawyers for Civil Justice (Barry Bauman, Washington, D.C., of counsel on the brief).
L. Poe Leggette and Nancy L. Pell of Fulbright & Jaworski L.L.P., Washington, D.C.; David L. Bryant, Tulsa, Oklahoma; and Michael E. Coney, Of Counsel, Shell Oil Company, New Orleans, Louisiana, filed a brief for amicus curiae Shell Oil Company.
BRORBY, Circuit Judge.
The issue before the en banc court is straightforward: Does the six-year statute of limitations provided by
BACKGROUND
In December 1996, the MMS issued an order directing OXY USA, Inc. (OXY) to pay additional royalties of $551,693.26, plus interest, for oil production from federal onshore and offshore leases in California for the period January 1980 - September 1983.2 OXY brought suit seeking, inter alia, a declaration the government‘s claims were time-barred under
We granted Petition for Rehearing in consolidated appeals, including Shell Oil Co. v. Babbitt, Nos. 98-5252 & 99-5098. As a result of settlement, we subsequently dismissed the Shell Oil cases by Order dated March 21, 2001. By that same Order, we agreed to treat the briefs filed in the Shell Oil cases as amicus briefs in this, the remaining appeal, OXY USA Inc. v. Babbitt, No. 98-5222.4
ANALYSIS
Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings required by contract or by law, whichever is later ....
(emphasis added.) The Government argues (1) 2415(a) limits the time within which the MMS may commence a judicial action (i.e., a lawsuit) to recover royalties, but not administrative collection proceedings; and (2) even if we determine the MMS order to pay constitutes an “action” under 2415(a), it is not an action founded on contract, does not seek money damages, and is encompassed by the “otherwise provided by Congress” exception.5
Reviewing this matter de novo,6 we conclude the statutory language, together with a forthright statutory scheme and purpose, clearly instruct that the six-year statute of limitation under
We decipher what constitutes “every action” affeсted by 2415(a) by considering the language and structure of the statute as a whole. See Medlock v. Ortho Biotech, Inc., 164 F.3d 545, 556 (10th Cir.) (citing Dole v. United Steelworkers of America, 494 U.S. 26, 41 (1990)), cert. denied, 528 U.S. 813 (1999). Although we are instructed to strictly construe any statute of limitation sought to be applied to bar rights of the Government, see Badaracco v. Commissioner of Internal Revenue, 464 U.S. 386, 391 (1984), we are not authorized to contort the language or structure of a statute of limitations in order to reach a result favorable to the government.
The phrase “every action” is patently broad, and is expressly limited in scope only by reference to the possibility of a specific exception “otherwise provided by Congress.”
The express purpose of
[T]he clear purpose of Congress in passing [section 2415] was to promote fairness to parties defending against stale Government contract and tort claims notwithstanding whatever prejudice might accrue thereby to the Government as a result of the negligence of its officers.
The structure of 2415 as a whole further advocates a broad interpretation of the phrase “every action.” To elaborate, subsection (f) includes two narrowly drafted exceptions to the time-bar, permitting thе government to defensively assert time-barred claims by way of offset or counter claim.
In sum, the language, purpose and structure of 2415 manifest Congress’ clear intent to impose a limitations period on administrative as well as judicial claims for unpaid royalties. Congress gave no indication agencies are free to assert their claims at any time by means other than court actions, unencumbered by the six-year limitation period. As Judge Brown so aptly noted in his dissent to the panel opinion, “excluding administrative collection proceedings from the definition of ‘action’ leads to irrational results and permits government agencies to evade the statute of limitations through procedural gimmickry.” OXY USA, 230 F.3d at 1193. We are confident Congress did not intend 2415 to be the means to this irrational end. The MMS order to pay royalties is an “action” under
“Founded on Contract”
We summarily reject the government‘s argument that actions to collect royalties under federal oil and gas leases are not based on contract. We have long-recognized that oil and gas leases are contracts. Phillips III, 4 F.3d at 860 n.1 (citing Reese Exploration, Inc. v. Williams Natural Gas, 983 F.2d 1514, 1518-19 (10th Cir. 1993)). The government itself has long recognized that the obligation of private entities to pay oil and gas royalties to the federal government derives from the execution of a vаlid federal lease. See Appellant‘s Opening Brief, Statement of Facts, at 5 (“All [federal and Indian] mineral leases provide for the payment of royalties.“); Memorandum, “Time for Commencing Actions to Collect Royalties, Rents, or Other Payments,” from Frederick N. Ferguson, Ass‘t Solicitor, Division of Minerals, to Chief, Conservation Division, Geological Survey at 1-2 (May 10, 1974) (“Royalties are collected by the Geological Survey pursuant to leases .... In all cases, the rights of the government as lessor and the rights of the lessee are embodied in a lease. A lease is a contract, and failure of the lessee to pay rent or royalties when due gives the lessor an immediate right to sue for breach. The usual rеmedy for breach of contract is money damages.“) The fact that the Secretary of the Interior administers federal oil and gas leases through the MMS, applying applicable royalty assessment (valuation) and collection regulations promulgated in accordance with the Federal Oil and Gas Royalty Management Act,
According to the MMS, quoting an unpublished decision from the Fifth Circuit, orders directing lessees to pay royalties “seek monies due under a contract with the government. Such contractual obligations cannot be considered compensatory,” and “are therefore not barred by the limitations pеriod of 2415.” Apt. Br. at 28-29 (quoting Phillips Petroleum Co. v. Johnson, 1994 WL 484506 (5th Cir., Sept. 7, 1994) (unpublished disposition) (Phillips IV)). We disagree with this narrow construction of the phrase “money damages” as used in
We first note the apparent incongruity of the government‘s argument the royalties they seek by way of an administrative order-to-pay are not founded on contract, and its use here of unpublished Fifth Circuit authority referring specifically to royalties as “monies due under a contract” and “contractual obligations.” Phillips IV, 1994 WL 484506 at *1. In any event, however, the Fifth Circuit rationale, based on its reading of Bowen v. Massachusetts, 487 U.S. 879 (1988), is neither binding nor persuasive.
The Supreme Court in Bowen concluded that the phrase “relief other than money damages,” as used to waive sovereign immunity under the Administrative Procedure Act,
“Except as Otherwise Provided”
Having established that the MMS’ efforts to collect royalties are, indeed, actions founded on contract for money damages, we shift our focus to whether, as the government suggests, such actions fall within the “except otherwise provided by Congress” exception to 2415 by virtue of the mineral leasing statutes and the Federal Oil and Gas Royalty Management Act. The government‘s argument on this point is difficult to distinguish from its argument that its administrative orders to pay royalties are based on statutes and regulations, not on contract. The government apparently believes that because Congress has enacted specific statutes governing oil and gas royalty assessment and collection, it never intended the general, six-year statute of limitations in 2415 to apply to MMS orders. We disagree.
To the extent the Federal Oil and Gas Royalty Management Act provides a specific statute of limitations that expressly supersedes the general statute of limitations at
For the reasons set forth, we conclude the MMS’ demand that OXY USA, Inc. pay royalties going back to 1980 constitutes an action for money damages, founded on contract, and barred by
Because I conclude the orders issued by the Minerals Management Service (MMS) are not barred by
I.
As noted by the majority, 2415(a) provides in relevant part:
Subject to the provisions of section 2416 of this title, and except as otherwise provided by Congress, every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings required by contract or by law, whichever is later.
Our review of 2415(a) is circumscribed by several well-established principles of statutory construction. First and foremost, we must give effect to the plain language of the statute. See, e.g., McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135 (1988). Second, “[s]tatutes of limitatiоn sought to be applied to bar rights of the Government, must receive a strict construction in favor of the Government.” Badaracco v. Comm‘r of Internal Revenue, 464 U.S. 386, 391 (1984); accord United States v. Ward, 985 F.2d 500, 502 (10th Cir. 1993) (interpreting 2415(a)); United States v. Hess, 194 F.3d 1164, 1175 (10th Cir. 1999) (interpreting 2415(b)). “[A]lthough we should not construe such a time-bar provision unduly restrictively, we must be careful not to interpret it in a manner that would extend the waiver beyond that which Congress intended.” United States v. Dalm, 494 U.S. 596, 608 (1990) (internal quotation omitted). Finally, we “are not authorized to rewrite a statute because [we] might deem its effects susceptible of improvement.” Badaracco, 464 U.S. at 398.
The focus of our statutory interpretation is the language in 2415(a), which places time limitations on “every action for money damages brought by the United States or an officer or agency thereof.” The word “action,” in its “usual legal sense” means “a lawsuit brought in а court; a formal complaint within the jurisdiction of a court of law.”1-1 Black‘s Law Dictionary at 28 (6th ed. 1990). The term “money damages” “normally refers to a sum of money used as compensatory relief . . . given to [a] plaintiff to substitute for a suffered loss.” Bowen v. Massachusetts, 487 U.S. 879, 895 (1988); see also Black‘s Law Dictionary at 389 (defining “damages” as “[a] pecuniary compensation or indemnity, which may be recovered in the courts“) (emphasis added). Taken together, the entire phrase plainly and indisputably refers to lawsuits brought by the federal government seeking compensatory relief for losses suffered by the government. The majority gives short shrift to this statutory language and focuses on the words “every action.” Without citing to any authority, the majority сoncludes these words are “patently broad” and “limited in scope only by reference to the possibility of a specific exception ‘otherwise provided by Congress.‘” Maj. Op. at 1005. Not only does this conclusion overlook the plain meaning of the word “action,” it ignores entirely the critical language that follows “every action,” i.e., the phrase “for money damages brought by the United States.” If there were any doubts about the scope of “every action” (which, for the reasons outlined above, I submit there legitimately are not), the ensuing language expressly limits the scope of the words to lawsuits filed by the United States seeking compensatory relief for damages suffered by the government.
The majority asserts that 2415(f) and (i) indicate the word “action” was intended to encompass agency proceedings. Section 2415(f) sets forth two exceptions to 2415(a)‘s six-year period of limitations, allowing the government to defensively assert time-barred claims (1) as counterclaims if they “arise[] out of the transaction or occurrence that is the subject matter of the opposing party‘s claim,” or (2) by way of offset if they “do[] not arise out of the transaction or occurrence that is the subject matter of the opposing party‘s claim.”
Although 2415(i) and the latter portion of 2415(f) (i.e., the portion allowing a governmental offset) unquestionably lend support to the majority‘s position, they cannot override the plain language of 2415(a). Thus, “Congress‘s enactment of section 2415(i) [and the latter portion of section 2415(f)] is best understood as a clarification оf the limited scope of section 2415(a), to ensure that section 2415 would not be applied to administrative offsets.” United States v. Hanover Ins. Co., 82 F.3d 1052, 1057 (Fed. Cir. 1996) (Bryson, J., dissenting). As the dissenting judge in Hanover recognized:
The legislative history of the 1982 amendment that added section 2415(i) provides support for that interpretation. Before 1982, the Justice Department had concluded that, absent an amendment, section 2415 could be invoked to prevent the administrative offset of debts more than six years old. The Comptroller General took the opposite position, arguing that section 2415 had no application to the administrative offset of debts. Noting the contrary position taken by the Justice Department, the Comptroller General recommended enacting subsection (i) “as a meаns of resolving the differences between us.” By adopting section 2415(i), Congress thus did not have to decide whether the Department of Justice or the Comptroller General had the better of the argument as to the proper construction of the pre-1982 version of section 2415.
In light of that background, the enactment of subsection (i) cannot be invoked to support the inference that Congress regarded section 2415(a) as extending to administrative actions. In any event, any such inference that could be drawn from the enactment of subsection (i) is not strong enough to overcome the clear language of section 2415(a). Particularly in light of the principle that statutes of limitations running against the sovereign are to be strictly construed, the apparent superfluity of section 2415(i) does not justify reading section 2415(a) to apply to cases that fall outside its explicit reach.
Id. (internal citations omitted); see also Gerrard v. United States Office of Educ., 656 F. Supp. 570, 573 n.3 (N.D. Cal. 1987) (stating that although Congress adopted 2415(i) in response to a Justice Department determination that the six-year limitation period applied to administrative offsets, “[T]here is no indication in the legislative history that Congress agreed with the department‘s interpretation“).
II.
Since, in my view, 2415(a) does not apply, it is necessary to briefly address whether the FOGRMA independently requires the government to collect unpaid royalties in a timely fashion. The statute directs the Secretary to “establish a comprehensive inspection, collection and fiscal and рroduction accounting and auditing system to provide the capability to accurately determine oil and gas royalties, interest, fines, penalties, fees, deposits, and other payments owed, and to collect and account for such amounts in a timely manner.”
OXY argues that the words “prompt” and “timely” indicate that the FOGRMA limits the time in which the government can collect royalties. But the language and structure of the statute undermine that assertion. For example, the word “timely” appears in a section of the statute titled “Duties of Secretary.” See
OXY‘s reference to the word “prompt” is equally unavailing. The word “prompt” appears in a section of the statute titled “Congressional statement of findings and purposes.” See
Finally, the legislative history of the FOGRMA also undermines OXY‘s claim. The House Report contains no support for the proposition that Congress intended to limit the time in which the government can initiate administrative collection proceedings. Aside from a reference to 1755, the Report makes no mention of a statute of limitations of any kind. Indeed, if anything, the Report supports the government‘s arguments that (1) the phrase “in a timely manner” in 1711 refers to the “comprehensive inspection, collection and fiscal production accounting and auditing system” to be adopted by the Secretary (rather than to specific orders issued by the MMS); and (2) the words “timely” and “prompt” wеre inserted to “promote the revenue interests of the federal, state, and Indian beneficiaries of the federal leasing programs and not to provide a shelter for royalty payors such as OXY.” See Reply Brief for the Appellants at 21. Among other things, the Report indicates that when Congress enacted the FOGRMA it was primarily concerned with (1) lost revenues resulting from poor royalty accounting practices by administrative agencies; (2) substandard auditing and verification procedures; (3) lax security on certain lease sites resulting in theft and fraud; and (4) an inadequate and inflexible array of enforcement tools. I conclude Congress’ use of the word “timely” in
I would reverse the district court‘s grant of summary judgment against the government and remand for entry of summary judgment in favor of the government.