Northern Natural Gas Co. v. Trans Pacific Oil Corp.

FILED
United States Court of Appeals
PUBLISH Tenth Circuit

June 17, 2008
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT

NORTHERN NATURAL GAS COMPANY,

Plaintiff - Appellee,

v.

TRANS PACIFIC OIL CORPORATION, BE
USA, L.P., 1987-1; VESOCO LLC; AIR
PIPELINE CORPORATION,

Defendants - Third Party
Nos. 07-3277
Plaintiffs - Appellants,
& 07-3195
v.

SONDRA BOYD; DALMER CRICK;
GERTRUDE CRICK; KATHY EPPERLY;
HERBERT PARK; MARVIN PARK;
CONNIE SUE PARMELY; JACK V.
CRICK, Executor of the Estate of Gertrude
Crick,

Third-Party-Defendants - Appellants.

Appeal from the United States District Court
for the District of Kansas
(D.C. No. 6:02-CV-01418-JTM)

Jim H. Goering of Foulston Siefkin LLP, Wichita, Kansas (Timothy B. Mustaine
of Foulston Siefkin LLP, Wichita, Kansas; and John V. Black of Black’s Law
Office, PA, Pratt, Kansas, with him on the briefs), for Defendants-Appellants.
Alan L. Rupe of Kutak Rock LLP, Wichita, Kansas (Richard A. Olmstead of
Kutak Rock LLP, Wichita, Kansas; and Mark Coldiron and Phillip Whaley of
Ryan, Whaley & Coldirn, P.C., Oklahoma City, Oklahoma, with him on the brief),
for Plaintiff-Appellee.

Before HENRY, Chief Judge, SEYMOUR and GORSUCH, Circuit Judges.

SEYMOUR, Circuit Judge.

This is an appeal from the district court’s determination that it lacked

subject matter jurisdiction to grant Trans Pacific Oil Corp.’s (Trans Pacific)

motion to enjoin Northern Natural Gas Co. (Northern) from proceeding before the

Federal Energy Regulatory Commission (FERC). We have jurisdiction pursuant

to 28 U.S.C. §§ 1291, 1292(a)(1), and we affirm.

I.

This case has a complicated history. Northern is a natural gas company

engaged in the interstate transportation of natural gas pursuant to the Natural Gas

Act, 15 U.S.C. § 717a. Since 1977, Northern has operated an underground natural

gas storage facility in Kansas called Cunningham Field. Trans Pacific owns the

Park Leases, located north of Cunningham Field, on which there are two

producing wells. The third-party defendants are individuals who have royalty or

overriding royalty interests in the Park Leases. Northern alleged that storage gas

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from the Cunningham Field has been migrating to the Park Leases and that Trans

Pacific has been producing that gas. Accordingly, in 2002, Northern filed an

action, seeking money damages and a permanent injunction prohibiting

production from the Park Leases. After trial in 2005, a jury found by special

verdict that no Northern storage gas had migrated to the Park Leases on or after

July 1, 1993. Post-trial, the district court rejected Northern’s challenges to the

jury verdict, as well as its request for a permanent injunction. Northern appealed,

and on September 19, 2007, this court affirmed. Northern Natural Gas Co. v.

Trans Pacific Oil Corp., 248 F.App’x 882 (10th Cir. 2007) (unpublished).

Meanwhile, Northern initiated additional proceedings involving the

Cunningham Field: one in a related district court case, Northern Natural Gas. Co.

v. Nash Oil & Gas, Inc., 506 F.Supp.2d 520 (D. Kan. 2007), and one before the

Kansas Corporation Commission (KCC). In the Nash suit, Northern alleged that

gas from the Cunningham Field had not only migrated to the Park Leases, but also

five miles further north to wells operated by Nash Oil & Gas. The district court

granted summary judgment for Nash on statute of limitations grounds and, in the

alternative, on the preclusive effect of the jury findings in this case. We recently

affirmed solely on the basis of the district court’s statute of limitations holding.

Northern Natural Gas Co. v. Nash Oil & Gas, Inc., ___ F.3d ___, 2008 WL

2080562 (10th Cir. 2008) (“[W]e need not address the district court’s alternative

reasoning premised on collateral estoppel.”)

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 When Northern initiated the proceeding before the KCC, Trans Pacific

moved this court to partially remand the then-pending appeal in the present case

so it could petition the district court to enjoin Northern from relitigating in other

forums the jury verdict and the district court’s earlier rulings. This Court granted

partial remand, and Trans Pacific moved the district court for a permanent

injunction against Northern’s alleged attempts to relitigate the issue of gas

migration from the Cunningham Field. In the meantime, the KCC stayed its

proceedings to await the district court’s decision.

On March 16, 2007, while the injunction motion was still pending before

the district court, Northern initiated a new FERC proceeding seeking a certificate

of public convenience and necessity to expand the Cunningham Field to

encompass the Park Leases as well as additional acreage further north. Northern

also dismissed its KCC proceeding. Northern is contending before FERC that the

earlier jury verdict and the district court’s legal rulings in this case have no

preclusive effect on its current FERC petition. Because the district court had not

yet ruled on Trans Pacific’s motion for a permanent injunction, Trans Pacific

moved for a preliminary injunction requiring Northern to withdraw its FERC

application. The district court denied that motion, concluding that it lacked

subject matter jurisdiction to enjoin a proceeding before FERC. Trans Pacific

appealed that interlocutory decision to this court.

While briefing on appeal was underway on the denial of the preliminary

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injunction, the district court denied Trans Pacific’s motion for a permanent

injunction against Northern’s alleged relitigation. The court again concluded that

it lacked subject matter jurisdiction to enjoin Northern’s proceeding before FERC.

It also agreed with Northern that insofar as Trans Pacific was seeking to enjoin

any proceeding before the KCC, it declined to do so because of the abstention

doctrine set forth in Younger v. Harris, 401 U.S. 37 (1971). It is these

determinations that we now address. 1

II.

We must decide whether courts have the power to enjoin the alleged

relitigation before FERC of a matter previously determined, at least in part, by a

federal court. We review de novo the district court’s determination that it lacked

subject matter jurisdiction. United States ex. rel. Sikkenga v. Regence Bluecross

Blueshield of Utah, 472 F.3d 702, 717 (10th Cir. 2006).

FERC is a federal administrative agency charged with implementation of

the Natural Gas Act. See 15 U.S.C. § 717. Under that act, natural gas companies

seeking to expand their storage facilities must first obtain a “certificate of public

convenience and necessity . . . authorizing such acts or operations” from FERC.

Id. § 717f(c)(1)(A). That is precisely what Northern is seeking to do in the

pending administrative proceeding that is, as of yet, still ongoing.

1
Given our ruling in this case, we DENY AS MOOT Trans Pacific’s appeal
of the district court’s denial of the motion for a preliminary injunction. See
Shaffer v. Carter, 252 U.S. 37, 44 (1920).

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 In SEC v. Otis Co., 338 U.S. 843 (1949) (per curiam), the Supreme Court

held that where an administrative proceeding is ongoing, a district court lacks

subject matter jurisdiction to enjoin it in order to prevent the relitigation of issues

finally decided by that court. Id. (reversing SEC v. Otis Co., 176 F.2d 34 (D.C.

Cir. 1949), which held that district court was authorized to enjoin SEC proceeding

in order to prevent relitigation). In making that determination, the Court relied on

an earlier case, Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41 (1938), in

which it held that a district court “was without power to enjoin [the NLRB] from

holding . . . hearings.” Id. at 47. The Court noted in Myers that concluding

otherwise would “in effect substitute the District Court for the Board as the

tribunal to hear and determine what Congress declared the Board exclusively

should hear and determine in the first instance.” Id. at 50.

The Fifth, Sixth, Seventh, and D.C. Circuits have reached similar

conclusions. See, e.g., R.R. Donnelley & Sons Co. v. FTC, 931 F.2d 430, 433-34

(7th Cir. 1991) (concluding that court could not review FTC’s denial of a motion

even on issue preclusion grounds); FTC v. Markin, 532 F.2d 541, 544 (6th Cir.

1976) (“Whether or not res judicata or collateral estoppel should be applied in

this case depends on a variety of factual determinations which should be made by

the Commission in the first instance.”); Coca-Cola Co. v. FTC, 475 F.2d 299, 304

(5th Cir. 1973) (“A contention of res judicata is not cognizable by courts until

administrative proceedings are at an end . . . .”); Brandenfels v. Day, 316 F.2d

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375, 378 (D.C. Cir. 1963) (“Even a decision in the postal proceedings in the

appellant’s favor would not necessarily preclude further action by the FTC since

. . . circumstances may have changed since the postal proceedings were instituted

and terminated. . . . And whether or not the FTC would be barred is itself a

question for the initial determination of that agency.”) (internal citations omitted).

The Second Circuit has ruled differently, holding that only cases involving

new evidence or a different ultimate issue fall under the umbrella of Otis. See

Sterling Drug Inc. v. Weinberger, 509 F.2d 1237, 1239-40 (2d Cir. 1975); Safir v.

Gibson, 432 F.2d 137, 143-44 (2d Cir. 1970). Even assuming the Second Circuit

is correct, which we doubt, that exception appears to be the case here. The jury

in this lawsuit did not decide that natural gas had never migrated north from

Cunningham Field; its decision at most was only that natural gas had not migrated

to the Park Leases on or after July 1, 1993, up to the date of trial. Northern

Natural Gas Co., 248 F.App’x at 885 (Special Verdict Form “required the jury to

determine whether Northern’s storage gas had migrated to Trans Pacific’s wells

‘after June 30 1993’”). See also id. at 888-89. Northern has represented that the

FERC proceedings involve new evidence in the form of a 2007 migration study

that is based in part on evidence collected after the jury’s verdict in this case.

Moreover, the ultimate issue before FERC – whether or not Northern is entitled to

a certificate of public convenience and necessity – is different from the ultimate

issue that was before the jury here. Thus, even under the Second Circuit’s

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interpretation of Otis, we would not have jurisdiction to enjoin the ongoing FERC

proceeding in this case.

Of course, we do not decide today that court judgments cannot have

preclusive effect in administrative proceedings. We merely hold that, given the

Supreme Court’s dictates, FERC must decide the res judicata issue for itself in

the first instance. As with any administrative proceedings, Trans Pacific will

have the right to appeal FERC’s final decision if it loses in that forum.

In sum, we hold that, under Otis and Myers, courts lack subject matter

jurisdiction to interfere with an ongoing proceeding before FERC. Accordingly,

the district court properly concluded that it could not enjoin Northern from

petitioning FERC for a certificate of public convenience and necessity.

III.

Trans Pacific correctly contends the district court erred in holding the

Younger abstention doctrine required it to abstain from enjoining Northern’s

proceedings before the KCC. As the district court itself recognized, the KCC had

stayed its proceedings on Northern’s application to await the outcome of the

district court’s ruling.

“For Younger abstention to be appropriate, three elements must be present:

(1) interference with an ongoing state judicial proceeding; (2) involvement of

important state interests; and (3) an adequate opportunity afforded in the state

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court proceedings to raise the federal claims.” Southwest Air Ambulance v. City

of Las Cruces, 268 F.3d 1162, 1178 (10th Cir. 2001) (emphasis added). Where,

as here, the state adjudicator has stayed its own proceedings to await the federal

court’s determination, “an essential predicate to Younger abstention is absent: the

presence of an ongoing state prosecution.” Id.

Moreover, because Northern withdrew its KCC application when it filed its

FERC application, there were no longer any state court proceedings for the

district court to enjoin. Consequently, although we disagree with the district

court’s Younger analysis, it correctly declined to enjoin what were then non-

existent proceedings.

AFFIRMED.

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