Murray v. BEJ Minerals, LLC, No. 16-35506 (9th Cir. 2019)

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Justia Opinion Summary

The en banc court stayed proceedings and certified the following question to the Montana Supreme Court: Whether, under Montana law, dinosaur fossils constitute "minerals" for the purpose of a mineral reservation.

Court Description: Mineral Rights. The en banc court stayed proceedings and certified the following question to the Montana Supreme Court: Whether, under Montana law, dinosaur fossils constitute “minerals” for the purpose of a mineral reservation.

This opinion or order relates to an opinion or order originally issued on November 6, 2018.

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FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT MARY ANN MURRAY; LIGE M. MURRAY, Plaintiffs-CounterDefendants-Appellees, No. 16-35506 D.C. No. 1:14-cv-00106-SPW v. BEJ MINERALS, LLC; RTWF, LLC, Defendants-CounterClaimants-Appellants. ORDER CERTIFYING QUESTION TO THE SUPREME COURT OF MONTANA Filed May 20, 2019 Before: Sidney R. Thomas, Chief Judge, and Kim McLane Wardlaw, Marsha S. Berzon, Jay S. Bybee, Consuelo M. Callahan, Sandra S. Ikuta, Mary H. Murguia, Morgan Christen, Paul J. Watford, Michelle T. Friedland, and Ryan D. Nelson, Circuit Judges. Order 2 MURRAY V. BEJ MINERALS SUMMARY* Mineral Rights The en banc court stayed proceedings and certified the following question to the Montana Supreme Court: Whether, under Montana law, dinosaur fossils constitute “minerals” for the purpose of a mineral reservation. ORDER THOMAS, Chief Circuit Judge: Upon a vote of a majority of the non-recused active judges, we granted rehearing en banc in Murray v. BEJ Minerals, LLC, 908 F.3d 437 (9th Cir. 2018) (“Murray II”), to determine whether dinosaur fossils are part of the surface estate or the mineral estate under Montana law. Murray v. BEJ Minerals, 920 F.3d 583 (9th Cir. 2019). This central question of state law is determinative of the instant case, and we find no controlling precedent in the decisions of the Montana Supreme Court. Mont. R. App. P. 15(3). Thus, we respectfully certify this question of law to the Montana Supreme Court pursuant to Rule 15 of the Montana Rules of Appellate Procedure. * This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. MURRAY V. BEJ MINERALS 3 As a general matter, “[t]he task of a federal court in a diversity action is to approximate state law as closely as possible in order to make sure that the vindication of the state right is without discrimination because of the federal forum.” Ticknor v. Choice Hotels Int’l, Inc., 265 F.3d 931, 939 (9th Cir. 2001) (quoting Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir. 1980)). If the state’s highest appellate court has not decided the question presented, then we must predict how the state’s highest court would decide the question. Id. However, if state law permits it, we may exercise our discretion to certify a question to the state’s highest court. Lehman Bros. v. Schein, 416 U.S. 386, 391 (1974). We may elect to certify a question sua sponte. Parents Involved in Cmty. Sch. v. Seattle Sch. Dist. No. 1, 294 F.3d 1085, 1086 (9th Cir. 2002), certified question answered, 72 P.3d 151 (Wash. 2003); see also Lombardo v. Warner, 391 F.3d 1008 (9th Cir. 2004) (en banc) (certifying question from an en banc court). The Montana Supreme Court permits certification of questions of law from federal courts. Mont. R. App. P. 15(3). “We invoke the certification process only after careful consideration and do not do so lightly.” Kremen v. Cohen, 325 F.3d 1035, 1037 (9th Cir. 2003). In deciding whether to exercise our discretion, we consider: (1) whether the question presents “important public policy ramifications” yet unresolved by the state court; (2) whether the issue is new, substantial, and of broad application; (3) the state court’s caseload; and (4) “the spirit of comity and federalism.” Id. at 1037–38. Whether dinosaur fossils belong to the surface estate or the mineral estate under Montana law presents important public policy ramifications for Montana that have not yet 4 MURRAY V. BEJ MINERALS been resolved by the Montana Supreme Court. Given the frequency of divided ownership of Montana surface and mineral estates, and that Montana possesses vast deposits of valuable vertebrate fossil specimens, the issue is substantial and of broad application. Therefore, after considering these factors, and in the spirit of comity and federalism, we exercise our discretion to certify this question to the Montana Supreme Court. Thus, pursuant to Montana Rule of Appellate Procedure 15(6), we provide the following information for the consideration of the Montana Supreme Court. 1 We first provide the factual context of this dispute, along with the procedural history. Mary Ann and Lige Murray live on a farm and ranch in Garfield County, Montana. Murray v. Billings Garfield Land Co., 187 F. Supp. 3d 1203, 1204 (D. Mont. 2016) (“Murray I”). As is common in Montana, the Murray property mineral estate has been severed from the surface estate. Id. at 1205. The Murrays own the surface estate and a minority interest in the mineral estate. Id. The remaining mineral rights are currently owned by nonMontana entities, BEJ Minerals, LLC and RTWF, LLC. Id. The parties’ mineral deed provides that the Murrays and these entities own, as tenants in common, “all right title and interest in and to all of the oil, gas, hydrocarbons, and minerals in, on and under, and that may be produced from the lands[.]” The purchase agreement accompanying the mineral deed obligated all the parties “to inform all of the other Parties of any material event which may [affect] the mineral interests and [to] share all communications and contracts with MURRAY V. BEJ MINERALS 5 all other Parties.” At the time the parties executed the purchase agreement and mineral deed in 2005, “none of the parties or their agents had ever considered whether the Mineral Estate as defined in the 2005 Mineral Deed included fossils, and none of the parties or their agents had or expressed any specific intent about who would be entitled to ownership of any fossils found on the Subject Property.” Shortly thereafter, in Fall 2005, the Murrays discovered a “spike cluster” fossil on the property, but did not consider this discovery significant. Id. Several valuable fossil discoveries have followed. These discoveries include the complete fossilized remains of a Tyrannosaurus rex, the fossilized remains of two dinosaurs locked in combat (the “Dueling Dinosaurs”), a large Triceratops skull, and a Triceratops foot. According to BEJ and RTWF, the Murrays first notified the other mineral titleholders of the fossil discoveries in 2008. BEJ and RTWF asserted an ownership interest based on their status as mineral titleholder in 2013. The Murrays filed a complaint on May 22, 2014, in Montana’s Sixteenth Judicial District Court, Garfield County, seeking a declaratory judgment that fossils found on the property are owned solely by the Murrays. BEJ and RWTF removed the case to federal district court on August 21, 2014, on the basis of diversity jurisdiction. BEJ and RWTF filed a counterclaim, seeking a declaratory judgment that the fossils are properly classified as minerals under Montana law, and an order directing the Murrays to provide a full accounting detailing all fossils found, expenses incurred, profits gained, and contracts formed regarding said fossils. The parties moved for summary judgment, and the district court granted the Murrays’ motion, declaring the Murrays, as 6 MURRAY V. BEJ MINERALS owners of the surface estate, the sole owners of the dinosaur fossils. Murray I, 187 F. Supp. 3d at 1212. Copies of the district court decision and panel opinion are attached. BEJ and RWTF timely appealed. A majority of a three judge panel of our Court reversed the district court, deciding the Montana state law question in a precedential opinion that bound the federal district courts in Montana, where many of these property interest disputes were likely to be litigated on the basis of diversity jurisdiction. The Murrays filed a petition for rehearing and rehearing en banc. BEJ and RWTF filed a response. We granted leave to various parties to file amicus briefs. Upon a majority vote of the active, nonrecused judges, we granted rehearing en banc, and by separate order designated Murray II as non-precedential. Because of the importance of the state law question, and the potential of different outcomes in federal and state courts, we have elected to certify the issue to the Montana Supreme Court. 2 The Montana Supreme Court has not decided the question of whether dinosaur fossils belong to the owner of surface estate or the owner of the mineral estate in Montana. The Montana Supreme Court has twice employed the “ordinary and natural meaning” test, first articulated by the Supreme Court of Texas, to determine whether a mineral deed encompasses a particular mineral. Farley v. Booth Bros. Land & Livestock Co., 890 P.2d 377, 380 (Mont. 1995) (applying the test first articulated in Heinatz v. Allen, 217 S.W.2d 994, 997 (Tex. 1949)); Hart v. Craig, 216 P.3d 197, 198 (Mont. 2009) (same). The Montana cases to apply Heinatz considered whether scoria useful for constructing MURRAY V. BEJ MINERALS 7 roadways, Farley, 890 P.2d at 380, and sandstone used in landscaping, Hart, 216 P.3d at 198, constituted minerals reserved by the instruments there at issue. The Montana Supreme Court has never applied the Heinatz test in the context of dinosaur fossils, nor have other state courts to apply the test resolved this question. On April 16, 2019, the Governor of Montana signed into law a bill declaring that dinosaur “fossils are not minerals and that fossils belong to the surface estate.” H.B. 229, 66th Leg. (Mont. 2019) (as transmitted to the Governor). H.B. 229 “does not affect penalties that were incurred or proceedings in courts that were begun” before the law takes effect, like the instant matter. Id. at § 5. In addition, the question of whether H.B. 229 applies retroactively has not been litigated. 3 In light of the foregoing, we respectfully certify the following question to the Montana Supreme Court: Whether, under Montana law, dinosaur fossils constitute “minerals” for the purpose of a mineral reservation? We acknowledge that, as the receiving court, the Montana Supreme Court may reformulate the certified question. Mont. R. App. P. 15(6)(a)(iii). The names and addresses of counsel for the parties, as required by Mont. R. App. P. 15(6)(a)(iv), are as follows: 8 MURRAY V. BEJ MINERALS Harlan B. Krogh and Eric Edward Nord, Crist, Krogh & Nord, PLLC, 2708 First Avenue North, Suite 300, Billings, MT 59101, for Appellees Mary Ann and Lige M. Murray. Brian C. Lake and Shane Ray Swindle, Perkins Coie LLP, 2901 North Central Avenue, Suite 2000, Phoenix, AZ 850122788, for Appellants BEJ Minerals, LLC and RWTF, LLC. 4 The Clerk shall forward a certified copy of this certification order, under official seal, to the Montana Supreme Court. The Clerk is also ordered to transmit a copy of the Excerpts of Record filed in this appeal to the Montana Supreme Court and, if requested by the Montana Supreme Court, provide all or part of the district court record not included in the Excerpts of Record. Mont. R. App. P. 15(5). The Clerk is further directed to forward a copy of the briefs filed by the parties, the petition for rehearing en banc, the response to the petition for rehearing en banc, and the amicus briefs filed concerning rehearing en banc. Submission of this appeal for decision is vacated and deferred pending the Montana Supreme Court’s final response to this certification order. The Clerk is directed to administratively close this docket, pending further order. The parties shall notify the Clerk of this court within fourteen days of the Montana Supreme Court’s acceptance or rejection MURRAY V. BEJ MINERALS 9 of certification, and again, if certification is accepted, within fourteen days of the Montana Supreme Court’s issuance of a decision. QUESTION STAYED. CERTIFIED; PROCEEDINGS 10 MURRAY V. BEJ MINERALS APPENDIX ! "#! $"# %& ! " # $ # % ! # & '' " ! ( ' % ) # * + , " " %% ,- %% *./ %% - 0 ' ,- %% *./ %% ) " # $ # % ! # ' 1 2 3 %( &/ 4 ! # 3 !4*4 * 0 )0 $5$2* ! %2"")0$ 5 $ & , # ! 6# 2 / ) 7 ' (8 6# # ,)& //# 0"%9 //# 7 '$ (8 " : 9 # ' ( 2 # !" ; ! " # $ ! % & ' ( ) ) * + , - # - , . * //# , " ! - ! - //# 0 # $ ! , # / $ 0 $ ! # //! ! 1 23 $ 0 ! # //! , 4 " # < $ < # 7 == = 8 , ;>?= < $ 7 @? @ A B 8 $ < $ & 0 $ 7 == = 8 9 1 ;>>; CDDA & 0 $ $ 0 ! 7 @ 8 4 CDDA & 0 $ 7 6 8 7 8 2 CDDA 7 8 " 1 E ;6= 0 $ ;6= & $ F $ //# ;6B / 2 7 8 1 , < / # 7 A 8 ! ! 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Although the term “surface estate” is used by the district court and the parties to describe the property that constitutes the Ranch other than the mineral estate, “surface estate” is a misnomer. The mineral estate includes any minerals found “in, on or under” the conveyed land, including minerals found on the surface. The surface estate, in turn, includes all of the property other than minerals, including property underneath the surface. Thus, whether a substance is found on the surface of the Ranch or underneath the surface of the Ranch does not determine whether that substance is part of the surface estate or part of the mineral estate. Instead, the only relevant question is whether the substance is a mineral. As a result, whether the Montana Fossils were found under the surface of the Ranch or protruding from the surface of the Ranch is irrelevant to this litigation. There is complete diversity between the plaintiffs and the defendants in the underlying action: Plaintiffs Mary Ann and Lige Murray are citizens of Montana; Defendant BEJ Minerals, LLC, is a Washington limited liability company with its principal place of business in Florida and members who are citizens of Florida and Washington; Defendant RTWF, LLC, is a Florida limited liability company with its principal place of business in Florida and members who are citizens of Florida; and Defendants Robert and Jerry Severson are citizens of Florida. In addition, the amount in controversy is over $75,000, as the parties agree that the Montana Fossils are worth millions of dollars. Under the 2005 agreement, the mineral estate for all but one parcel of the Ranch is divided as follows: Robert Severson owns one third, Jerry Severson’s company, Severson Minerals, LLC, owns one third, and Lige and Mary Ann Murray each own one sixth. With respect to the other parcel, Billings Garfield Land Company, an unrelated third party, owns half of the mineral rights, with the other half distributed among the Seversons and Murrays in the same proportions as the remainder of the land’s mineral estate (one third to Robert Severson, one third to Severson Minerals, LLC, and one sixth to each of the Murrays). For additional background regarding the discovery of the Montana Fossils, see Mike Sager, Will the Public Ever Get to See the “Dueling Dinosaurs”?, Smithsonian Magazine, July 2017, available at https://www.smithsonianmag.com/sciencenature/public-ever-seedueling-dinosaurs-180963676/ (last visited Sept. 4, 2018). Robert Severson’s interest is now held by BEJ Minerals, LLC (“BEJ”), and Jerry Severson’s interest is now held by RTWF LLC (“RTWF,” and hereinafter, together with Robert Severson, Jerry Severson, and BEJ, “the Seversons”). The parties’ experts testified that the bones and teeth of living vertebrates are composed of the inorganic mineral hydroxylapatite and various organic components, including, for example, tissue, marrow, nerves, blood vessels, and collagen. After a vertebrate’s death, all of the organic components of the bones and teeth eventually decompose, leaving only the inorganic mineral hydroxylapatite. Over time, this mineral may “recrystallize” into a different mineral, francolite. As noted above, the parties’ experts dispute whether the x-ray diffraction test results indicate that the Montana Fossils are composed of the mineral hydroxylapatite, or whether the Montana Fossils instead contain the mineral francolite (which the mineral hydroxylapatite could have recrystallized into during the fossilization process). The parties do not dispute, however, that the Montana Fossils are entirely composed of one or both of these two mineral substances. " #$ %& ' & ( ) % ' * + , % ' - .& ! " ! 7 8 9 10 11 1 See Webster’s (defining “fossil fuel” as “a fuel (such as coal, oil, or natural gas) that is formed in the earth from plant and animal remains”). The court looked at two conflicting statutory definitions of mineral from Title 82 of the Montana Code, which relates to minerals, oil, and gas. The first statutory definition, relating to metal mine reclamation, defined “mineral” as: any ore, rock, or substance, other than oil, gas, bentonite, clay, coal, sand, gravel, phosphate rock, or uranium, taken from below the surface or from the surface of the earth for the purpose of milling, concentration, refinement, smelting, manufacturing, or other subsequent use or processing or for stockpiling for future use, refinement, or smelting. Farley, 890 P.2d at 379 (quoting Mont. Code Ann. § 82-4-303(9) ). The second statutory definition, from the section relating to “opencut” mining reclamation, defined “minerals” as “bentonite, clay, scoria, phosphate rock, sand, or gravel.” Id. (quoting Mont. Code Ann. § 82-4-403(6) ). Recognizing that these two statutory definitions were “not necessarily consistent” – given that one definition explicitly included scoria but it was “unclear” whether it would be included in the other – the court concluded that the term “mineral” has varying definitions in different contexts. Id. The Murrays first cite a statutory definition stating in relevant part that “mineral” means “any ... substance, other than oil, gas, bentonite, clay, coal, sand, gravel, phosphate rock, or uranium, taken from below the surface of the earth or from the surface of the earth for the purpose of ... subsequent use or processing or for ... future use.” See Mont. Code Ann. § 82-4-303(16). Although the Murrays claim that this definition does not include the Montana Fossils, it does: the Montana Fossils are a substance (other than the specific substances listed) taken from below the surface of the earth for the purpose of subsequent use. The Murrays’ second statutory definition, which states that “mineral” means “any ... nonrenewable merchantable products extracted from the surface or subsurface of the state of Montana,” see Mont. Code Ann. § 15-38-103(3), is similarly applicable to the Montana Fossils: the Montana Fossils are nonrenewable, merchantable products, and they were extracted from the subsurface of Montana. The Murrays next argue that “minerals” cannot include dinosaur fossils in general because certain Montana statutes and regulations differentiate between “fossils” and “minerals.” The Murrays point to the definition for “general recreational use” within the Montana Department of Natural Resource’s regulations regarding surface management rules for leasing of state-owned land, which contains separate exclusions for the “collection, disturbance, alteration, or removal of archeological, historical, or paleontological cites or specimens (e.g. fossils, dinosaur bones ...)” and “mineral exploration, development, or mining,” and notes that the former requires an antiquities permit and the latter requires a mineral lease or license. See Mont. Admin. R. 36.25.145. The Murrays also note that the Montana Historical Society has the power to collect and preserve “fossils, plants, minerals, and animals,” suggesting that the separate listing of “fossils” and “minerals” means that they must be distinct, non-overlapping categories. See Mont. Code Ann. § 22-3-107. Contrary to the Murrays’ assertion, the separate listing of minerals and fossils does not establish that fossils are not a subset of minerals. More fundamentally, these definitions relate to a particular statutory scheme and are not relevant here. Finally, the Murrays cite the federal Paleontological Resources Preservation Act (“the PRPA”), 16 U.S.C. § 470aaa, which defines “paleontological resources” as including “fossilized remains,” and the regulations under that act, which provide that “paleontological resources” do not include “coal, oil, natural gas, and other economic minerals that are subject to the existing mining and mineral laws.” See 36 C.F.R. § 291.9(d). In addition to their irrelevance to this case since they apply to federal land, the PRPA regulations actually undermine the Murrays’ argument, because the regulations would not need to exclude coal, oil, natural gas, and other similar minerals from the definition of paleontological resources unless those substances would otherwise be included in the definition. To the extent that the Montana Supreme Court has not formally adopted the Heinatz test, we predict that, if faced with the issue, it would do so. See First Intercontinental Bank v. Ahn, 798 F.3d 1149, 1157 (9th Cir. 2015) (explaining that, as a federal court sitting in diversity, “when the state’s highest court has not squarely addressed an issue, we must predict how the highest state court would decide the issue”) (internal quotation marks omitted) (quoting Glendale Assocs., Ltd. v. Nat’l Labor Relations Bd., 347 F.3d 1145, 1154 (9th Cir. 2003) ). As the Seversons point out, a museum’s ownership of fossils would only be in doubt following this decision if the museum purchased fossils from the owner of the surface rights of the property where the fossils were found, the mineral estate was owned by another party that did not consent to the sale of the fossils to the museum, and the mineral estate was defined to include all “minerals” without any further definition or clarification of the term. Even then, if the mineral estate’s owner successfully sued the museum for ownership of the fossils, the museum could recover the value of the sale from the owner of the surface estate. In spite of the novel question of law and the potential policy implications of this case, the parties did not request certification of this question to the Montana Supreme Court. See M. R. App. P. 15(3)(a)–(b). " #$ %& ' & ( ) % ' * + , % ' - .& ! " ! 2 3 The majority goes to pains to distinguish each and every definition presented by the Murrays, in an effort to prove that fossils fall under none of them. While I would agree that no single definition cited by the district court or the parties on appeal is wholly dispositive here, I see no error in the district court’s use of these statutes in an effort to discern whether any similar properties exist among these definitions that might shed light on the scope of the term “mineral.” See Dollar Plus Stores, 209 P.3d at 219; Newman v. Wittmer, 277 Mont. 1, 917 P.2d 926, 930 (1996) (“[S]tatutory definitions provide guidance in interpreting the ordinary and popular meaning of undefined terms in a restrictive covenant.”). I agree with the majority’s conclusion that although the Montana Supreme Court did not expressly adopt the Heinatz test, it would likely do so. In any event, the ultimate question—whether fossils fall within the ordinary and natural meaning of “mineral”—is the same under Farley, Hart, and Heinatz. End of Document © 2018 Thomson Reuters. No claim to original U.S. Government Works. " #$ %& ' & ( ) % ' * + , % ' - .&

Primary Holding

The en banc court stayed proceedings and certified a mineral rights question to the Montana Supreme Court.

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