Slawson Exploration Company, Inc. v. United States Department of the Interior et al

RESPONSE to Motion re MOTION to Dismiss

D.N.D.October 25, 2017

IN THE UNITED STATED DISTRICT COURT FOR THE DISTRICT OF NORTH DAKOTA WESTERN DIVISION Slawson Exploration Company, Inc., Plaintiff, v. United States Department of the Interior; Ryan Zinke, in his official capacity as Secretary of the United States Department of the Inte- rior; Interior Board of Land Appeals; and Administrative Judge James K. Jackson, Defendants, and Mandan, Hidatsa, & Arikara Nation, Intervenor. Civil Action No. 1:17-cv-00166-DLH-CSM SLAWSON’S RESPONSE TO MOTION TO DISMISS Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 1 of 23 i TABLE OF CONTENTS Background ......................................................................................................................................................... 2 1. Agency Actions ....................................................................................................................... 2 The BLM Approval Order ...................................................................................... 2 The IBLA Stay Order ............................................................................................... 3 The OHA Director’s Review .................................................................................. 4 2. This District Court Action .................................................................................................... 5 Argument ............................................................................................................................................................ 5 1. Rule 12(b)(6), Not Rule 12(b)(1), Applies Because the Requirement of “Final Agency Action” Is Not Jurisdictional under Controlling Eighth Circuit Law ................................................................................................................. 5 2. The United States Has Waived Sovereign Immunity for Final Agency Actions Like the One at Issue Here ..................................................................................... 8 3. The IBLA Stay Order Is Final Agency Action ................................................................... 9 3.1 The IBLA Stay Order Represents a Definitive Position That Inflicted an Actual, Concrete Injury ....................................................................... 9 3.2 The MHA Nation Does Not Show That the IBLA Stay Order is Nonfinal ................................................................................................................ 11 3.3 The OHA Director’s Decision to Review the IBLA Stay Order Does Not Affect the Finality of That Order ...................................................... 14 4. Slawson Did Not Fail to Exhaust Administrative Remedies Before Seeking Judicial Review of the IBLA Stay Order ............................................................ 16 Conclusion ........................................................................................................................................................ 18 Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 2 of 23 ii TABLE OF AUTHORITIES Cases Air Courier Conference v. Am. Postal Workers Union, 498 U.S. 517 (1991) ....................................................................................................................................... 5 Am. Farm Lines v. Black Ball Freight Services, 397 U.S. 532 (1970) ..................................................................................................................................... 15 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ....................................................................................................................................... 8 Bennett v. Spear, 520 U.S. 154 (1997) ....................................................................................................................................... 9 Black Hills Inst. of Geological Research v. S.D. Sch. of Mines and Tech., 12 F.3d 737 (8th Cir. 1993) .......................................................................................................................... 6 Christensen v. Harris Cty, 529 U.S. 576 (2000) ....................................................................................................................................... 3 Christopher Lake Dev. Co. v. St. Louis Co., 35 F.3d 1269 (8th Cir. 1994) ...................................................................................................................... 10 Clean Air Council v. Pruitt, 862 F.3d 1 (D.C. Cir. 2017) ............................................................................................................... passim Darby v. Cisneros, 509 U.S. 137 (1993) ............................................................................................................................. passim Farrell-Cooper Mining Co. v. U.S. Dept. of Interior, 864 F.3d 1105 (10th Cir. 2017).......................................................................................................... passim In re Pre-filled Propane Tank Antitrust Litig., 860 F.3d 1059 (8th Cir. 2017), petition for cert. filed (U.S. Sept. 22, 2017) ................................................ 8 In re Russell, 155 F.3d 1012 (8th Cir. 1998) ...................................................................................................................... 7 Iowa League of Cities v. EPA, 711 F.3d 844 (8th Cir. 2013) ............................................................................................................... 5, 6, 7 Lujan v. Nat’l Wildlife Fed., 497 U.S. 871 (1990) ....................................................................................................................................... 7 Moore v. Healthcare of Iowa, Inc., No. 16-CV-1021-CJW, 2016 WL 6518445 (N.D. Iowa Nov. 2, 2016) ............................................... 17 Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 3 of 23 iii Ochoa v. Holder, 604 F.3d 546 (8th Cir. 2010) ............................................................................................................... 5, 6, 7 Oryszak v. Sullivan, 576 F.3d 522 (D.C. Cir. 2009) ..................................................................................................................... 6 Ouachita Watch League v. Henry, 59 F. Supp. 3d 922 (E.D. Ark. 2014) .......................................................................................................... 6 Stone v. I.N.S., 514 U.S. 386 (1995) .............................................................................................................................. 17, 18 Williamson Cty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985) ................................................................................................................................ 9, 10 Winter v. I.C.C., 851 F.2d 1056 (8th Cir. 1988) ....................................................................................................... 14, 15, 18 Wrather-Alvarez Broad., Inc. v. FCC, 248 F.2d 646 (D.C. Cir. 1957) ................................................................................................................... 15 Wright v. Langdeau, 158 F. Supp. 3d. 825 (D.S.D. 2016) ....................................................................................................... 7, 8 Statutes and Codes 28 U.S.C. § 1331 ............................................................................................................................................ 6, 7 43 C.F.R. § 3165.4 ................................................................................................................................. 3, 12, 13 43 C.F.R. § 4.21 ........................................................................................................................................... 3, 13 43 C.F.R. § 4.5 .................................................................................................................................................... 4 5 U.S.C. § 701 ..................................................................................................................................................... 6 5 U.S.C. § 704 ........................................................................................................................................... passim Rules Fed. R. Civ. P. Rule 12(b)(1) ....................................................................................................................... 6, 8 Fed. R. Civ. P. Rule 12(b)(6) ....................................................................................................................... 6, 8 Other Authorities David M. Burton, 11 OHA 117 (1995) .............................................................................................................. 3 S. Rep. No. 752, 79th Cong., 1st Sess., 27 (1945) ....................................................................................... 15 Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 4 of 23 1 The MHA Nation’s motion to dismiss confuses two separate administrative actions. The ad- ministrative decision that formed the basis for Slawson’s lawsuit—the late-entered IBLA Stay Order that required Slawson to stop drilling—meets the requirements for final agency action because there was nothing more for the Agency to do and the IBLA Stay Order unquestionably affected Slawson’s rights and obligations. This Court has jurisdiction over Slawson’s complaint. That the MHA Nation appeals a different order at the Agency—the BLM’s approval of Slawson’s permits to drill—does not change the character of the IBLA Stay Order. Separately, the MHA Nation identifies no additional administrative steps that Slawson was required to exhaust prior to bringing suit. Slawson’s complaint meets the requirements for judicial review under the Administrative Pro- cedures Act in all respects: the APA’s waiver of sovereign immunity applies, the IBLA Stay Order is final agency action, and Slawson met the APA’s exhaustion requirements. In addition, since the MHA Nation filed its Motion to Intervene, BLM sought Director’s Re- view, and on October 13, 2017, the Director assumed jurisdiction. The process contemplated in the Federal Government’s Consent to Extension of Temporary Restraining Order, D.E. 16, is proceeding as anticipated. Once the schedule for the Director’s review is clarified in the next few days, Slawson will seek to extend the Temporary Restraining Order until the Director’s decision has been issued. Because the Court has jurisdiction over this dispute and the MHA Nation offers no legally valid reason to disturb the current consented-to Temporary Restraining Order, Slawson respectfully requests that the Court deny the MHA Nation’s Motion to Dismiss, D.E. 28, and maintain the Tem- porary Restraining Order in place.1 1 At the end of its Memorandum, D.E. 29 at 19–20, the MHA Nation asks this Court to dissolve the Temporary Restraining Order for the same reasons stated in its Motion to Dismiss. Because these arguments duplicate those made urging dismissal, Slawson does not separately address the arguments relating to the Temporary Restraining Order. Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 5 of 23 2 BACKGROUND 1. Agency Actions This case concerns two separate agency actions. The first is an order by the Montana State Director of the BLM reconfirming Slawson’s right to drill multiple wells from a well pad on private lands within the outer bounds of the MHA Nation’s Reservation (the “BLM Approval Order”). D.E. 1 ¶¶ 11–14. The MHA Nation has appealed the BLM Approval Order, asking the IBLA to overturn it. Id. ¶¶ 14–15. The second relevant agency action is an order from the IBLA staying the BLM Ap- proval Order during the pendency of the MHA Nation’s appeal (the “IBLA Stay Order”). Id. ¶ 19. This lawsuit challenges the second agency action, not the first. The BLM Approval Order The BLM Approval Order relates to wells that are a part of Slawson’s Torpedo Federal Project, where Slawson has begun to drill multiple horizontal wells from a single well pad to develop oil and gas leases beneath the bed of Lake Sakakawea. Id. ¶ 11. The Torpedo Federal Project will access and develop existing federal, state, and fee oil and gas leases beneath Lake Sakakawea. Id. ¶ 12. Although the wells are within the boundaries of the Fort Berthold Reservation, the Torpedo well pad is on private land, and the Torpedo wells would not develop any tribally owned lands or tribal minerals. Id. ¶ 12. Instead, the minerals are owned by non-Indians, the federal government (not held in trust), and the state of North Dakota. Id. Slawson applied to the BLM for permits to conduct the Torpedo Federal Project in 2011. Id. ¶ 13. The BLM approved Slawson’s permits to drill in March of this year. Id. The MHA Nation sub- sequently sought administrative review of the BLM’s Order approving Slawson’s permits. Id. ¶ 14. It argued the location of Slawson’s well pad, which was sited 600 feet from the shore of Lake Sakakawea, conflicted with a recent tribal resolution imposing a 1,000-foot setback from the lake on all oil and gas development, regardless of whether the development was of Indian or non-Indian leases. Id. It Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 6 of 23 3 also asserted the location of the well pad conflicted with the BLM’s resource management plan and management decisions of the Bureau of Indian Affairs and Army Corps of Engineers. Id. Though tardy, the BLM Montana State Office entertained the MHA Nation’s request for review but affirmed the North Dakota Field Office’s decision to issue the Torpedo permits through the BLM Approval Order on April 24, 2017. Id. Under the applicable regulations, the BLM Approval Order immediately went into effect. 43 C.F.R. § 3165.4(c). The MHA Nation next filed a Notice of Appeal of the BLM Approval Order with the Mon- tana State Office and the IBLA on May 24, 2017, pursuant to 43 C.F.R. §§ 3165.4(a), (c)—the day the 30-day period for such filing expired. Id. ¶ 15. Slawson intervened in the appeal. Id. ¶ 16. The MHA Nation’s appeal is still pending, as discussed in more detail in Section 1.3 below. The IBLA Stay Order Alongside its appeal of the BLM Approval Order, the MHA Nation petitioned to stay the BLM Approval Order pending the MHA Nation’s appeal. Id. ¶ 15. The Agency’s Office of Hearings and Appeals (the “OHA”) regulations direct that the IBLA “shall grant or deny” petitions for stay within 45 days of the expiration of the period for filing a Notice of Appeal, 43 C.F.R. § 4.21(b)(4), but the deadline for a decision on the MHA Nation’s Petition for Stay passed without any IBLA action.2 Id. ¶ 17. Confident that its permits would be in effect for the pendency of the MHA Nation’s appeal, Slawson began drilling. D.E. 3-4 ¶ 5. Nearly a month after the Board’s 45-day period to rule on the Petition for Stay expired, the IBLA issued its Stay Order granting the MHA Nation’s Petition for Stay on August 9, 2017. D.E. 1 ¶ 19. As explained in Slawson’s request for a Temporary Restraining Order, however, the IBLA made 2 The MHA Nation cites David M. Burton, 11 OHA 117 (1995), for the proposition that the IBLA regulations stating that a stay petition “shall” be ruled upon within 45 days is not mandatory. But as explained more fully in Slawson’s Motion for Temporary Restraining Order, D.E. 3-1 at 13–14, agencies cannot ignore the unambiguous language of their own regulations. Christensen v. Harris Cty, 529 U.S. 576, 588 (2000). Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 7 of 23 4 a fundamental factual error in granting the Stay Order. D.E. 3-1 at 17–18. Upon its issuance, the IBLA Stay Order went into effect immediately. But for this Court’s temporary restraining order discussed below, that IBLA Stay Order would still be in effect, and would prevent Slawson from using the previously active permits issued by the BLM. The OHA Director’s Review The Agency’s regulations allow the Director of the OHA (the “Director”) to “assume juris- diction of any case before any board of the Office . . . .” 43 C.F.R. § 4.5(b). On September 28, 2017, the BLM petitioned the Director, asking it to assume jurisdiction over the MHA Nation’s appeal of the BLM Approval Order. BLM Petition for Director Review, attached as Ex. A. The BLM also re- quested that the Director review and reconsider the IBLA Stay Order. Id. Slawson then filed a brief with the Director echoing the BLM’s request for the Director to take jurisdiction over the MHA Nation’s appeal of the BLM Approval Order. Slawson Request for Director Review, attached as Ex. B. Slawson did not, however, agree with the BLM’s request for the Director to review the IBLA’s Stay Order. Id. at 1. It stated that “[a]lthough the BLM has requested Director review of both the IBLA stay order and the merits of the appeal pending before the IBLA, Slawson believes that the most efficient and most appropriate path forward is for the Director to assume jurisdiction over the entire appeal and only issue a decision on the merits of the appeal.” Id. On October 13, 2017, the Director accepted jurisdiction over the MHA Nation’s appeal, and agreed to review the merits of the appeal of the BLM Approval Order and the IBLA Stay Order. 10/13/17 Order, attached as Ex. C. The Director ordered the parties to submit a proposed briefing schedule by October 27, 2017. Id. Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 8 of 23 5 2. This District Court Action After the IBLA issued its Stay Order but before the BLM asked for Director review of the MHA Nation’s appeal, Slawson filed this lawsuit. Slawson seeks judicial review of the IBLA Stay Or- der. D.E. 1 ¶¶ 1, 21. Slawson does not, as the MHA Nation implies, ask this Court to review the BLM Approval Order that is the subject of the MHA Nation’s agency appeal. Shortly after Slawson filed this action, it asked this Court to temporarily restrain the govern- ment from enforcing the IBLA Stay Order. D.E. 3. This Court granted that request on August 15, 2017. D.E. 11. Subsequently, the government agreed to extend this Court’s Temporary Restraining Order while the administrative process proceeded through October 31, 2017. D.E. 17. The MHA Nation then sought to intervene and to move to dismiss Slawson’s complaint. D.E. 20. This Court granted the MHA Nation’s motion to intervene, extended the Temporary Restraining Order through November 17, 2017, and the MHA Nation’s Motion to Dismiss is currently before this Court. D.E. 27. ARGUMENT 1. Rule 12(b)(6), Not Rule 12(b)(1), Applies Because the Requirement of “Final Agency Action” Is Not Jurisdictional under Controlling Eighth Circuit Law The MHA Nation argues that the APA’s “final agency action” requirement “bar[s] jurisdiction to intervene with pending administrative appeals” because “there has been no waiver of sovereign immunity.” D.E. 29 at 8. But the Eighth Circuit has made clear that “the APA’s requirements are part of a party’s cause of action and are not jurisdictional.” Iowa League of Cities v. EPA, 711 F.3d 844, 863 n.12 (8th Cir. 2013) (citing Air Courier Conference v. Am. Postal Workers Union, 498 U.S. 517, 523 n.3 (1991) (“The judicial review provisions of the APA are not jurisdictional.”)) The Eighth Circuit explained that because “[t]he APA is not an independent jurisdictional provision,” it “merely provides the framework for judicial review of agency action.” Ochoa v. Holder, 604 F.3d 546, 549 (8th Cir. 2010). In Ochoa, the issue Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 9 of 23 6 was whether an agency action was reviewable because it met an exception to the APA for “agency action . . . committed to agency discretion by law” under 5 U.S.C. § 701(a)(2). Id. There, the Eighth Circuit held that “[w]hen a plaintiff complains about an action that is committed to agency discretion by law, it does not mean that a court lacks subject matter jurisdiction over the claim.” Id; see also Oryszak v. Sullivan, 576 F.3d 522, 525 (D.C. Cir. 2009) (explaining that “[b]ecause the APA does not apply to agency action committed to agency discretion by law, a plaintiff who challenges such an action cannot state a claim under the APA” and, “[t]herefore, the court has jurisdiction over his case pursuant to § 1331, but will properly grant a motion to dismiss the complaint for failure to state a claim”). Here, as in Oryszak, this Court’s subject matter jurisdiction arises from 28 U.S.C. § 1331— federal question jurisdiction—and not from the APA itself. See Black Hills Inst. of Geological Research v. S.D. Sch. of Mines and Tech., 12 F.3d 737, 740 (8th Cir. 1993) (holding that “the district court had general federal question jurisdiction under 28 U.S.C. § 1331” in suit challenging agency action under the APA). Because the APA is not jurisdictional, courts recognize that motions to dismiss relating to APA claims are brought under Fed. R. Civ. P. Rule 12(b)(6), not, as the MHA Nation contends, Fed. R. Civ. P. Rule 12(b)(1). For example, the Eastern District of Arkansas recently held, citing Iowa League of Cities and Ochoa, that a motion to dismiss under the APA should be decided on 12(b)(6), not 12(b)(1) grounds: Defendants contend that [the APA] claims fail because [Plaintiffs] have not identified a final agency action but instead allege only broad “programmatic” challenges . . . De- fendants appear to argue, at least initially, that this is a Rule 12(b)(1) argument and that the Court should analyze it under that standard. To the extent that defendants make this argument, the Court disagrees. The Eighth Circuit has held that “[t]he APA is not an independent jurisdictional provision . . . but merely provides the framework for judicial review of agency action.” Ochoa v. Holder, 604 F.3d 546, 549 (8th Cir. 2010). “The APA’s requirements are part of a party’s cause of action and are not jurisdic- tional.” Iowa League of Cities v. EPA, 711 F3d 833, 863 n.12 (8th Cir. 2013). Accordingly, the Court will analyze this argument under the Rule 12(b)(6) standard. Ouachita Watch League v. Henry, 59 F. Supp. 3d 922, 930–31 (E.D. Ark. 2014). Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 10 of 23 7 The MHA Nation cites three cases from the Supreme Court or Eighth Circuit in support of its subject matter jurisdiction argument. The first, Lujan v. Nat’l Wildlife Fed., 497 U.S. 871, 882 (1990), only sets forth the basic standard of requiring standing for suits under the APA and does not discuss subject matter jurisdiction. The second, Wright v. Langdeau, 158 F. Supp. 3d. 825, 832 (D.S.D. 2016), involved a situation where the plaintiffs “allege[d] that the APA forms a basis for subject matter juris- diction.” The court rejected that argument but recognized that 28 U.S.C. § 1331 could provide “inde- pendent grounds of federal jurisdiction.” Id. at 833. There, unlike here, the plaintiffs did not “allege that a final agency action resulted in the harm” and the court held that, absent such an allegation of final agency action, the APA did not apply and that there was no basis in the APA or elsewhere to “form a basis of subject matter jurisdiction.” Id. at 834. The final case, In re Russell, 155 F.3d 1012, 1013 (8th Cir. 1998), was a brief per curiam opinion that held that the Eighth Circuit did not have jurisdiction to consider a mandamus petition appealing from the Court of Veterans of Appeals because the relevant statute vested the Federal Circuit and the Supreme Court as the only appropriate forums for appeal. The Russell court recognized that the APA’s waiver of sovereign immunity extended only to those cases where there was “no other adequate rem- edy in a court” and held that the APA’s waiver of sovereign immunity did not apply to the “review of VA procedures by any court other than the C[ourt of] V[eterans] A[ffairs], Federal Circuit, and Su- preme Court.” Id. Because the petitioner sought relief in the wrong forum, there was no waiver of sovereign immunity and the court held it had no jurisdiction. In re Russell is therefore unrelated to the present situation. It concerns the interaction of a specific jurisdictional grant from a statute other than the APA with the APA’s waiver of sovereign immunity. It does not tackle the question whether the APA’s finality requirement is jurisdictional in nature. In re Russell therefore does not impact the clear holdings of the later-decided cases of Iowa League of Cities and Ochoa. Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 11 of 23 8 Because there is no basis to decide the MHA Nation’s motion to dismiss on the grounds of subject matter jurisdiction under Rule 12(b)(1), Rule 12(b)(6) applies. Under Rule 12(b)(6), this Court can dismiss the complaint only if it fails to state a claim upon which relief can be granted. To do so, the complaint must “alleg[e] ‘sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” In re Pre-filled Propane Tank Antitrust Litig., 860 F.3d 1059, 1063 (8th Cir. 2017), petition for cert. filed (U.S. Sept. 22, 2017) (No. 17-441) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Because the complaint states, in detail, why the IBLA Stay Order is final agency action, it states a claim for relief that is plausible on its face and therefore survives the low Rule 12(b)(6) threshold. 2. The United States Has Waived Sovereign Immunity for Final Agency Actions Like the One at Issue Here The MHA Nation argues that this Court does not have jurisdiction to hear this case because the United States, as sovereign, is immune from suit, and has not waived that immunity for this type of action. The MHA Nation is correct that the United States must waive sovereign immunity in order for a court to have jurisdiction to hear a claim brought against it. But it is incorrect that such a waiver is not present here. The APA contains a general waiver of sovereign immunity for suits in which a plaintiff claims injury due to final agency action. The APA states that “final agency action for which there is no other adequate remedy in a court [is] subject to judicial review.” 5 U.S.C. § 704. In other words, “[t]he APA waives the United States’ sovereign immunity” for a suit challenging “a final agency action for which there is no other adequate remedy in a court.” Wright, 158 F. Supp. 3d at 833 (quoting 5 U.S.C. § 704). The MHA Nation admits as much in its brief, stating that “the United States has . . . waived its sover- eign immunity under the APA where the Plaintiff seeks review of a ‘final agency action’ under 5 U.S.C. § 704.” D.E. 21-2 at 7. Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 12 of 23 9 As explained in Section 3 below, Slawson’s injury does, in fact, stem from final agency action, so the United States has waived its sovereign immunity, and consented to be sued, for the type of action currently at bar. 3. The IBLA Stay Order Is Final Agency Action The APA creates a cause of action for “final agency action for which there is no other adequate remedy in a Court.” 5 U.S.C. § 704. The IBLA Stay Order challenged by Slawson is final agency action. The APA, governing regulations, and applicable case law confirm as much, as do the real-world inju- ries Slawson would face without the restraining order currently in place. The IBLA Stay Order is therefore subject to judicial review. 3.1 The IBLA Stay Order Represents a Definitive Position That Inflicted an Actual, Con- crete Injury “As a general matter,” an agency action is final, and therefore reviewable, if it “mark[s] the ‘consummation’ of the agency’s decisionmaking process” and if it is one by which “‘rights or obliga- tions have been determined,’ or from which ‘legal consequences will flow.’” Bennett v. Spear, 520 U.S. 154, 178 (1997). This determination does not rest on whether any related agency proceeding is ongo- ing; rather the question of finality is “whether the initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.” Darby v. Cisneros, 509 U.S. 137, 144 (1993) (emphasis added) (quoting Williamson Cty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 193 (1985)). Here, the “initial decisionmaker”—the IBLA—“arrived at a definitive position”—entering the IBLA Stay Order—“that inflict[ed] an actual, concrete injury”—halting drilling well after the time for any such stay had passed causing Slawson to incur substantial and nonrecoverable losses. Under Darby, agency action can be final, and judicial review appropriate, even when proceed- ings related to that action are ongoing. See infra § 3.3; Farrell-Cooper Mining Co. v. U.S. Dept. of Interior, 864 F.3d 1105, 1117 (10th Cir. 2017) (applying Darby and finding that “an IBLA appeal and a federal lawsuit” can “proceed[] on parallel tracks”). C.f. Christopher Lake Dev. Co. v. St. Louis Co., 35 F.3d 1269, Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 13 of 23 10 1273 (8th Cir. 1994) (reversing dismissal under Williamson County because of county decisions about development even though plaintiff could have sought further review before other decisionmakers). The D.C. Circuit case of Clean Air Council v. Pruitt, 862 F.3d 1 (D.C. Cir. 2017), provides an apt example. In Clean Air Council, the EPA decided to reconsider a rule that was about to go into effect, and stayed that rule pending reconsideration. Id. at 5. Multiple environmental groups sought judicial review of both the EPA’s decision to reconsider the rule and the stay order. Id. at 5–6. The Court held that the decision to reconsider the rule was not final because reconsideration was ongoing and the EPA’s reconsideration decision “merely beg[an] a process that could culminate in no change to the rule.” Id. at 6. But the Court found that despite the “interim” nature of the stay order, it was final agency action subject to judicial review. Id. The Court reasoned that the stay order “represent[ed] the final agency position on this issue, ha[d] the status of law, and ha[d] an immediate and direct effect on the parties.” Id. at 6–7. The fact that the “EPA’s proceedings concerning the methane rule [were] ongoing” did not have an effect on the stay order’s finality, because “the applicable test is not whether there are further administrative proceedings available, but rather whether the impact of the order is sufficiently final to warrant review in the context of the particular case.” Id. at 7 (internal quotations and citation omitted). Clean Air Council is on all fours with this case. Under the governing regulations, both the BLM Approval Order and the IBLA’s inaction within 45 days of the MHA Nation’s petition for stay gave Slawson the right to drill. That right was taken away when the IBLA issued its belated Stay Order. Indeed, Slawson would have had to pay substantial sums to comply with the IBLA Stay Order but for this Court’s Temporary Restraining Order. Slawson’s rights and obligations were affected the moment the IBLA Stay Order was issued. No further agency action was necessary to effect that IBLA Stay Order; the decisionmaking process had been consummated. The ongoing nature of the agency’s re- view of the BLM Approval Order does not change the fact that the IBLA Stay Order controls Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 14 of 23 11 Slawson’s rights and obligations during the uncertain length of time during which the MHA Nation’s appeal of the BLM Approval Order is pending. As in Clean Air Council, IBLA’s order determining Slawson’s interim rights pending the MHA Nation’s appeal is final agency action subject to review because it is a “definitive position . . . that inflicts an actual, concrete injury.” Darby, 509 U.S. at 144. 3.2 The MHA Nation Does Not Show That the IBLA Stay Order is Nonfinal The MHA Nation presents several arguments in support of its assertion that Slawson is chal- lenging a nonfinal order. Those arguments are each unavailing. The MHA Nation’s primary contention is that Slawson is prematurely seeking judicial review of the same issues raised in the MHA Nation’s pending agency appeal. See, e.g., D.E. 21-2 at 15-16 (“[T]he administrative appeal process has been invoked and is currently ongoing, which . . . supports the conclusion that no final agency action has been issued.”) This position confuses the two agency orders implicated by this suit. The MHA Nation’s appeal concerns the BLM Approval Order. Slawson would not seek judicial review of that order; it granted Slawson’s request for drilling permits. Slawson is instead seeking review of the IBLA’s Stay Order. The two orders are distinct from one another: the IBLA Stay Order has already gone into effect, and the MHA Nation has not appealed the IBLA Stay Order. More importantly, the judicial intervention related to the IBLA Stay Order would have no effect on the Agency’s review of the BLM Approval Order, as it would merely settle whether the Agency’s decision regarding Slawson’s interim rights was proper. The MHA Nation’s professed con- cerns about Slawson’s collateral attack on its appeal are therefore misplaced. The MHA Nation next argues that the IBLA’s applicable regulations render Slawson’s suit unreviewable by this Court. The MHA Nation contends that under the IBLA regulations, “when a decision is stayed it is rendered inoperative, is a nonfinal agency action and is not subject to appeal.” D.E. 21-2 at 11. Once again, the MHA Nation confuses the stayed BLM Approval Order (which Slawson is not challenging) with the IBLA Stay Order. The fact that the IBLA Stay Order renders a Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 15 of 23 12 different order nonfinal would not mean that the IBLA Stay Order itself is nonfinal. The MHA Nation’s discussion of 43 C.F.R. § 3165.4(f) does not add to its argument. That subsection merely states the truism that judicial review is appropriate when a party is “aggrieved by a final order.” As explained above, the IBLA Stay Order is a final order. The MHA Nation additionally tries to distinguish the analogous case of Clean Air Council. No- tably, the MHA Nation does not cite a single case to counter Clean Air Council’s holding that agency actions that decide a party’s interim rights pending an agency proceeding are final agency actions. In arguing that Clean Air Council does not provide persuasive authority here, the MHA Nation just iden- tifies distinctions that make no difference. For instance, the MHA Nation raises the fact that the agency action in Clean Air Council was a stay of a “final rule” as opposed to an administrative decision. D.E. 21-2 at 14. But it fails to explain why that makes any difference, because it does not. What matters is that the stay order in each case finally decided a party’s substantive rights pending resolution of an underlying proceeding. The MHA Nation next contends that the IBLA Stay Order is “temporary pending an actual decision,” and implies that the Clean Air Council stay order was not “temporary.” That is not so. Clean Air Council makes clear that the final agency action at issue was an order concerning “interim relief.” 862 F.3d at 6. Nevertheless, the MHA Nation implies that the Clean Air Council stay was different than this one because it was likely to last two years. But it is not uncommon for IBLA appeals to last just as long. See https://www.doi.gov/oha/organization/ibla/faqs (Q28) (“Most cases are decided within two years.”). And in any event, there is no cap on the amount of time an appeal of a BLM order can take. The MHA Nation also suggests that the stay in Clean Air Council was different because the IBLA Stay Order is not the consummation of agency action, given the presence of the MHA Nation’s Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 16 of 23 13 pending appeal. Again, there is no difference between this case and Clean Air Council: in both instances, agency proceedings were ongoing and the order at issue concerned a party’s interim rights. Finally, the MHA Nation contends that Clean Air Council is inapplicable because it held that the defending agency did not have authority to issue the stay order that was under review. But that contention relates to the merits of the appeal, not whether an appeal was permitted. In fact, it was the court’s determination that the stay was final agency action that even allowed the court to consider whether the agency had the authority to grant the stay. The MHA Nation also suggests in passing that Clean Air Council’s holding would lead to the “absurd result” of all agency stays being considered “final agency action,” which, the MHA Nation claims, would “prevent agencies from completing their review processes.” D.E. 21-2 at 14. That is wrong for several reasons. First, Slawson does not claim that all agency stays must be “final agency action” under the APA, as this stay is different. As an initial matter, decisions that fall under 43 C.F.R. § 3165.4, like the BLM Approval Order, go into effect immediately, while others are typically inoperative pending stay requests. Compare see 43 C.F.R. § 3165.4(c) to 43 C.F.R. § 4.21(a). Thus, stays of § 3165.4 decisions, unlike other stays, take away concrete rights that have already been granted. More importantly, the IBLA Stay Order was issued after the 45-day window during which the IBLA was empowered to grant a stay. Slawson waited to start drilling until it had the comfort of a denied stay petition, only to have its legitimate expectations—financial and otherwise—disrupted by the tardy IBLA Stay Order. Thus, but for this Court’s Temporary Restraining Order, Slawson would have suffered a concrete injury different in kind from that imposed by a typical stay order. Second, even if the logic of Clean Air Council was extended more broadly to all stays pending review, judicial review of stays does not “prevent agencies from completing their review processes.” A court determination of parties’ interim rights and obligations pending agency proceedings has no Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 17 of 23 14 effect on that agency’s determination of parties’ permanent rights and obligations. Third, judicial re- view of a stay order alongside agency review of an underlying order is no more absurd than simulta- neous judicial and administrative review of an initial agency order, which is unquestionably permitted. Farrell-Cooper Mining Co., 864 F.3d at 1117 (holding that an IBLA appeal and federal lawsuit can “pro- ceed[] on parallel tracks” when a petition for stay of a BLM order is denied). Fourth, and as the court in Clean Air Council observed, the MHA Nation’s proposed rule “would have the perverse result of empowering this court to act when the agency denies a stay but not when it chooses to grant one.” Clean Air Council, 862 F.3d at 7. In short, the MHA Nation has put forward no argument that contradicts the clear and logical holding of Clean Air Council: orders that definitively decide a party’s interim rights during agency pro- ceedings are final agency actions. 3.3 The OHA Director’s Decision to Review the IBLA Stay Order Does Not Affect the Finality of That Order In Reply, the MHA Nation may argue that the BLM’s request for the OHA Director’s review of the IBLA Stay Order, and the Director’s grant of that request, renders the IBLA Stay Order non- final. That is not so. The fact that the BLM, rather than Slawson, asked the Director to review the IBLA Stay Order means that the IBLA Stay Order is still final as applied to Slawson, for two reasons. First, in multi-party proceedings where an initial agency order can be challenged through judi- cial or administrative review, one party’s decision to seek administrative review does not prevent an- other party from seeking judicial review. The Eighth Circuit made this plain in Winter v. I.C.C., 851 F.2d 1056, 1062 (8th Cir. 1988). There, a union challenged an agency decision in court while also seeking a petition to reopen the decision with the agency. Id. at 1060, 1062. The Court observed that “no cases hold that the same party may simultaneously seek both judicial and administrative review,” but also noted that in multi-party proceedings “one party may seek judicial review of an agency deci- sion while another party seeks administrative reconsideration.” Id. at 1062 (emphasis added). Thus, Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 18 of 23 15 “[a]n agency decision may . . . be final for one purpose yet nonfinal for another purpose.” Id.; see also Am. Farm Lines v. Black Ball Freight Services, 397 U.S. 532, 541 (1970); Wrather-Alvarez Broad., Inc. v. FCC, 248 F.2d 646, 649 (D.C. Cir. 1957) (“[P]arties to Commission proceedings have their choice whether to seek relief from Commission action from the Commission itself or from the court. And it may happen, as it has here, that one party will choose one tribunal and another party the other. That both tribunals have jurisdiction does not mean, of course, that they will act at cross purposes.”) Thus, BLM’s choice to challenge the stay order through agency review does not render the effective stay order nonfinal as to Slawson, nor does it prevent Slawson from seeking judicial review. Second, nonvoluntary reconsideration of an initial order cannot render that order nonfinal when, as here, the initial order is operative pending the reconsideration. The genesis of this rule is § 704 of the APA, which establishes that an agency can only make an action nonfinal pending recon- sideration if the agency provides that “the action meanwhile is inoperative.” 5 U.S.C. § 704. The Su- preme Court confirmed the meaning of § 704 in Darby, explaining that an agency can only “avoid the finality of an initial decision” if it “provid[es] that the initial decision would be ‘inoperative’ pending appeal.” 509 U.S. at 152. The purpose of this rule is cogently explained in the APA’s legislative history: In no case may appeal to “superior agency authority” be required by rule unless the administrative decision meanwhile is inoperative, because otherwise the effect of such a requirement would be to subject the party to the agency action and to repetitious administrative process without recourse. There is a fundamental inconsistency in re- quiring a person to continue “exhausting” administrative processes after administra- tive action has become, and while it remains, effective. Darby, 509 U.S. at 147-48 (quoting S. Rep. No. 752, 79th Cong., 1st Sess., 27 (1945)). Because of this rule, courts recognize that agency actions can be final even when they appear not to be the “consummation of the agency’s decisionmaking process.” The Tenth Circuit recently made that very observation in Farrell-Cooper Mining Co., 864 F.3d at 1113–14. In Farrell-Cooper, the Court confirmed that the Agency’s mandatory agency appeal did not render an initial agency decision nonfinal because the decision was operative pending that mandatory appeal. Id. at 1107. The agency Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 19 of 23 16 argued that the initial decision could not possibly be final with an appeal pending, because the initial decision was not the “consummation of the agency’s decisionmaking process.” Id. at 1113–14. The Court recognized that agency actions must represent the “consummation” of agency decision making “as a general matter,” but determined that § 704 and Darby control when a party faces an operative agency action as well as involuntary agency review of that action. Id. at 1114. The focus, the Court observed, should be on “whether the initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.” Id. (emphasis in original) (internal quotations and citation omitted). Thus, pending review of an operative decision does not render that decision nonfinal if the review was not voluntary. Here, Slawson faces an operative decision in the IBLA Stay Order and mandatory agency proceedings due to the BLM’s request for Director review of that Order.3 Under Darby, such a scenario cannot render the IBLA Stay Order nonfinal. 4. Slawson Did Not Fail to Exhaust Administrative Remedies Before Seeking Judicial Review of the IBLA Stay Order The MHA Nation argues that Slawson’s complaint should be dismissed because it did not exhaust its administrative remedies. But the MHA Nation cites no standard stating when and how administrative remedies must be exhausted, nor does it point to any statutes or rules containing pro- cedural hurdles that Slawson has not cleared. Instead, the MHA Nation cites vague statements about the importance of agency independence, and repeats arguments from its section on finality about the need to allow the MHA Nation to finish its appeal of the BLM Approval Order (which, again, is not being challenged in this action). A look at the actual standard for exhaustion of administrative remedies makes clear that Slawson has not failed to do so. 3 That the Agency mandated Slawson’s participation in the Director review of the IBLA Stay Order through its own request for reconsideration (via the BLM) rather than a formal rule requiring such a request for reconsideration makes no difference. The Agency cannot do by action what it is prohibited from doing by rule. Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 20 of 23 17 “It is well established in the Eighth Circuit that failure to exhaust an administrative remedy is an affirmative defense,” and “[t]he burden is on defendants . . . to prove that [plaintiff] failed to ex- haust . . . administrative remedies.” Moore v. Healthcare of Iowa, Inc., No. 16-CV-1021-CJW, 2016 WL 6518445, at *2 (N.D. Iowa Nov. 2, 2016). The MHA Nation has not met this burden. Exhaustion of administrative remedies is, in fact, a requirement to move forward with an ac- tion based on the APA. But the only administrative remedies that must be exhausted before an agency action is subject to judicial review are procedures that are (1) mandated by statute, or (2) mandated by agency rule, as long as that agency rule also makes the challenged agency action inoperative pending the mandated procedure. 5 U.S.C. § 704; Darby, 509 U.S. at 146-48 (recognizing that the APA “has limited the availability of the doctrine of exhaustion of administrative remedies to that which the statute or rule clearly mandates,” but that an agency rule can only mandate administrative review of agency decision if the “administrative decision meanwhile is inoperative”). The MHA Nation does not point to any statute or agency rule establishing an administrative procedure Slawson needed to exhaust before seeking judicial review of the IBLA Stay Order. And even if there were such a statute or rule, the mandated procedure would not prevent judicial review of the IBLA Stay Order given that it is currently operative, and Darby prevents mandated appeals of operative agency actions. See supra, § 3.3. There is no question that the IBLA Stay Order was immedi- ately operative. D.E. 22 at 1 (“This letter is a notification to [Slawson] . . . to shut in all operations on the referenced well pad.”). So any mandated proceedings subsequent to the IBLA Stay Order would be rendered discretionary by Darby. The MHA Nation may try to counter by citing Stone v. I.N.S. and similar cases for the propo- sition that even discretionary administrative remedies must be exhausted once a party decides to bring them. See Stone v. I.N.S., 514 U.S. 386, 392 (1995) (“The timely filing of a motion to reconsider renders the underlying order nonfinal for purposes of judicial review.”). The MHA Nation would argue that Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 21 of 23 18 the BLM’s discretionary request for the Director to review the IBLA Stay Order triggers Slawson’s obligation to exhaust its administrative remedies by litigating the IBLA Stay Order in front of the Director. But such an argument would require a misreading of Stone, which applies to parties who “elect[] to seek a rehearing.” Stone, 514 U.S. at 392 (emphasis added). See also Winter, 851 F.2d at 1062; Farrell-Cooper, 864 F.3d at 1116 (reading Stone as only applying when “a ‘party elects to seek a [non- mandatory] rehearing’”). Slawson did not elect to seek Director review of the IBLA Stay Order. In fact, it specifically told the Director that it did not think review of the IBLA Stay Order was appropri- ate. Ex. B at 1. Stone and similar cases are therefore unrelated to this suit. In sum, the MHA Nation cites no rule or statute requiring additional administrative procedures prior to judicial review of the IBLA Stay Order. And even if it did, the operative nature of the IBLA Stay Order would render such a “mandatory” appeal voluntary under § 704 of the APA. Either way, Slawson has not failed to exhaust its administrative remedies, and certainly has not done so in a manner that renders its complaint defective. CONCLUSION The MHA Nation contends that judicial review of the IBLA Stay Order would interfere with the Agency’s consideration of the MHA Nation’s appeal of the BLM Approval Order granting Slawson’s drilling permits. While the two orders are related, a decision regarding the IBLA Stay Order does not impact the Agency’s ability to determine the parties’ permanent rights via the MHA Nation’s appeal. The IBLA Stay Order is final agency action and is reviewable by this Court. Accordingly, the MHA Nation’s Motion to Dismiss should be denied. Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 22 of 23 19 Dated: October 25, 2017 Respectfully submitted /s/ Eric Olson . Eric R. Olson (pro hac vice) BARTLIT BECK HERMAN PALENCHAR & SCOTT LLP 1801 Wewatta Street, Suite 1200 Denver, CO 80202 Tel: (303) 592-3100 Fax: (303) 592-3140 eric.olson@bartlit-beck.com Daniel McElroy (pro hac vice) BARTLIT BECK HERMAN PALENCHAR & SCOTT LLP Courthouse Place 54 West Hubbard, Suite 300 Chicago, IL 60654 Tel: (312) 494-4400 Fax: (312) 494-4440 daniel.mcelroy@bartlit-beck.com Robert Thompson III (pro hac vice) Jeffrey Lippa GREENBERG TRAURIG, LLP 1200 17th Street, Suite 2400 Denver, CO 80202 Tel: (303) 572-6500 Fax: (303) 572-6540 thompsonIII@gtlaw.com lippaj@gtlaw.com Kathleen C. Schroder (pro hac vice) Timothy R. Canon II (pro hac vice) DAVIS GRAHAM & STUBBS LLP 1550 Seventeenth Street, Suite 500 Denver, CO 80202 Tel: (303) 892 9400 Fax: (303) 893 1379 katie.schroder@dgslaw.com tim.canon@dgslaw.com Counsel for Plaintiff Case 1:17-cv-00166-DLH-CSM Document 33 Filed 10/25/17 Page 23 of 23