Petition — Naartex Consulting Corp. v. Clark

SR - Tha oes Sirens oar US

No. FEB 27 1998

United States SuprembCosek—— |

Octoser TERM, 1983

NAARTEX CONSULTING CORPORATION,

Petitioner,

¥.

JAMES G. WATT, SECRETARY OF THE INTERIOR, ef ai.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Attorney for the

Petitioner:

DANIEL J. PILIERO

TIGHE, CURHAN & PILIERO

1750 Pennsylvania Ave., N.W.

Washington, D.C. 20006

(202) 628-0300

Of Counsel:

EILEEN MALLOY-WALL

TIGHE, CURHAN & PILIERO

1750 Pennsylvania Ave., N.W.

Washington, D.C. 20006

Me vin E. Leste

Ten Broadway Building

Suite 632

Ten West Broadway

Salt Lake City, Utah 84101

Il.

IIl.

QUESTIONS PRESENTED FOR REVIEW

Whether an implied private right of

action exists under the Mineral

Leasing Act of 1920.

If there is no private right of

action under the Mineral Leasing

Act of 1920, whether violation of

the regulations thereunder may give

rise to a common law cause of

action for fraud.

Whether the federal anti-assignment

laws prevent the assertion of another

persons rights against the federal

government under the Mineral Leasing

Act of 1920.

<<)

PARTIES TO THE PRECEEDING IN

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

l. Naartex Consulting Corporation -

Appellant.

2. Russell Huff - Intervenor.

3. James G. Watt, Secretary of the

Interior - Appellee.

4. Michigan Wisconsin Pipeline Company -

Appellee.

5. American Natural Resources Company -

Appellee.

6. General American Oil Company of

Texas - Appellee.

7. Raymond G. Albrecht - Appellee.

8. Fred L. Engle d/b/a Resource

Services Company - Appellee.

9. Davis Oil Company - Appellee.

10. Southland Royalty Company -

Appellee.

ll. J.S. Harrell - Appellee.

12. Reading & Bates Petroleum Company -

Appellee.

13. Panhandle Western Gas Company -

Appellee.

- iii -

14. Paul Messenger & Company - Appellee.

15. Marlis E. Smith, Trustee/Marlis E.

Smith Trust - Appellee.

16. Gordon L. Heele - Appellee.

- iv e-

TABLE OF CONTENTS

Questions Presented for

Revi ew . . . . . . . . . . 7 .

Parties to the Preceding in

the United States Court of

Appeals for th District

ef Coliwmeie Cirewit .+.«-seee

Table of Authorities

Opinions Below . . . « «© « «© © « «

Jurisdiction >. . >. . . _ >. . . . .

Statutes and Rules Involved ...

Statement of the Case ....

I. The Proceedings Below ...

Il. The Federal Oil and

Gas Leasing Program ...

III. The Award of Lease

W-50394 7 es 7 i ° . 7 . .

Reasons For Granting The Writ ..

I. The Court of Appeals Has

Decided Important Questions

of Federal Law Which Have Not

Been and Should Be Settled

By Tmie Court . 26 « © es «

Il.

Ill.

TABLE OF CONTENTS (cont.)

The Ability of the

Government to Conduct

a Fair Process for

Issuing Federal Oil

and Gas Leases Has

Been Severely Impaired

By the Decision of

the Court of Appeals

A Private Right of

Action Should Be

Implied Under the

Mineral Leasing Act

Seen «2 2

A. Naartex and Russell

Huff are Members of

the Class For Whose

Special Benefit the

Statute Was Enacted

B. The Legislative

History of the

Mineral Leasing

Act Indicates an

Intent to Create

a Private Remedy .

A Private Right

of Action Would

Be Consistent With

the Underlying

Purpose of the Act

Page

22

32

33

37

39

IV.

- Wale. .

TABLE OF CONTENTS (cont.)

D. Plaintiff's Cause

of Action is Not

One Traditionally

Relegated to State

Se ee oe a a

If There is No Private

Right of Action Under

the Mineral Leasing

Act of 1920, Violation

of the Regulations

Thereunder Should

Give Rise to a Common

Law Cause of Action

For Fraud, Unjust

Enrichment or Conspiracy

Naartex's Suit Against

the Federal Government

Should Not Be Deemed to

Be Barred By the Federal

Anti-Assignment Laws,

in the Alternative,

Russell Huff Should

Be Permitted to Intervene

as a Matter of Right in

Order to Maintain the

Action in His Own Right

A. Naartex Consulting

Corporation Has

Standing to —_—

on Behalf of Huf

‘|

Page

4G

46

50

- 50

- vii -

TABLE OF CONTENTS (cont.)

Page

B. Even if Naartex

Had No Standing,

Huff Was Entitled

to Maintain the

Lawsuit in His

Own Right .. « «6 « « « $3

Com@iusion . « ss ses tes eee OO

APPENDLa . . + 7 o ~ . . . - . . A-l

Memorandum Opinion of the United

States Court of Appeals For the

District of Columbia Circuit

(Decided 11/29/83) ... +++. Aq!l

Order of the United States

Court of Appeals For the

District of Columbia Circuit

(Filed 11/29/83) ° . . + 7 . ° A-75

Memorandum Opinion of the United

States District Court For the

District of Columbia

(Decided 6/21/82) . . « « « »« » « A-77

Order of the United States

District Court For the

District of Columbia

(Filed 6/21/82) . . . . ” . 7 ° . A-130

Decision of the Interior

Board of Land Appeals

(Decided 6/9/80) / 2 2. es cee 4s. Oe SG A-133

- viii -

TABLE OF CONTENTS (cont.)

Order of the Interior

Board of Land Appeals

(Issued 9/16/80) o ” . ° oo 7 7 + A-162

Decision of the Bureau

of Land Management

(Decided 9/28/79) . . . . «ss A-166

- ix -

TABLE OF AUTHORITIES

Cases

Cannon v. University of Chicago,

. + (1979) . . . . . .

Cort v. Ash, 422 U.S. 66

. . . . . . . . . . . .

Lola I. Doe, 31 IBLA 394

Ernst & Ernst v. Hochfelder,

oSe cz

denied 425 U.S. 986 ( es

Freedman's Savings & Trust

foeeany Vv. Shepherd, ca?

J.I. Case egpeany v. Borak,

Kentucky Utilities Company v.

“Fennessee Valley Authority,

237 F. § P 502 (E.D

7 u P- . 7

Tenn. 1964), aff'd sub non.,

Hardin v. Kentucky Utilities

Company, 390 UST oo

Lowey v. Watt, 684 F.2d 957

° . Tr. 982) . . 7 . . . -

McKenzie v. Irving Trust

“Company, ae 1945) .

McTierman v. Franklin, 508

F.2d 885 (10th Cir. 1975)...

33, 37

42

51

41

48

24

55

16

TABLE OF AUTHORITIES (cont.)

Cases Page

Merrill, Lynch, Pierce, Fenner

& Smith v. Curran, _ ff #

2) S ¢€. &>.2 es 6 O°" 8-8 42

Sidney H. Schreter, et al.,

32 TELA i Mel | a ae

Sect v. Rochell, 382 U.S.

66) . . . . . . . . 7 54, 55

John Steffans, 77 I.D. 146

ate) 6 6 ele + 6 os 8 e 6 ee 6

United States v. Aetna Suret

Company, 338 U.S. 366 Z1545% so» 32

United States v. Jordan, 186 F.2d

803 (6th Cir. 1951), aff'd per

curiam 342 U.S. 911 (1952) ,

United States v. Sharon,

7 . . . . 7 . . . 51

inian Railway Company v.

Br stems Federation No. i

> . + . . . . . . 45

Statutes and Rules

28 U.S.C. $1254(1) (1976) .... 3

28 U.S.C. $1331(a) (1976) .... 12

- xi -«-

TABLE OF AUTHORITIES (cont.)

Statutes and Rules Page

28 U.S.C. $1361 (1976) ... . 12

30 U.S.C. §$226(a) (1976) .. . 22

30 U.S.C. $226-2 (1976) .. . 38

31 U.S.C. $203 (1976) .« «ss 13,

41 U.S.C. $15 (1976) . . ws 13,

43 C.F.R. §3100.0-5(b) (1981) 17,

36

43 C.F.R. §3102.2-7 (1981) . . 17,

26

43 C.F.R. §3102.7 (1977) .. . 17,

43 C.F.R. $3103.3-2 (1977) . . 16

43 C.F.R. §3112.2-1 (1977) . . 16,

43 C.F.R. §3112.2-1(£) (1981) 18,

43 C.F.R. §3112.4-1 (1977) . . 17

43 C.F.R. §3112.5-1 (1977) . . 17

43 C.F.R. §3112.5-2 (1975) . . 18

43 C.F.R. $3112.6-1(b) (1981) 23

Fed. R. Civ. P. 17(a) «2. 53

- xii -

TABLE OF AUTHORITIES (cont.)

Statutes and Rules

Supreme Court Rule 17.1(c)

Cee + 6 O08. © a: Wee 66 6 es

Other Authorities

68 Cong. Rec. 6143 (1960) ....

Page

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

The Petitioner Naartex Consulting

Corporation (hereinafter "Naartex")

respectfully requests that a writ of

certiorari issue to review the opinion

and judgment of the United States Court

of Appeals for the District of Columbia

Circuit entered on November 29, 1983.

OPINIONS BELOW

Naartex Consulting Corporation's

initial protest was denied by the United

States Department of the Interior Bureau

of Land Management by letter dated

September 28, 1979. (A-166).

The Bureau of Land Management's

decision was appealed to the United

States Department of the Interior Board

of Land Appeals. That decision is

reported as Naartex Consulting Corp.,

IBLA 80-65, 48 IBLA 166 (June 9, 1980),

petition for rehearing denied (September

16, 1980). (A-133)

Naartex Consulting Corp. brought

suit in the United States District Court

for the District of Columbia. The

decision of the District Court is

reported as Naartex Consulting Corp. v.

Watt, 542 F. Supp. 1196 (D.D.C. 1982).

(A-77). |

The United States Court of Appeals

decision from which review is sought is

Naartex Consulting Corp. v. James G.

Watt, Secretary of the Interior, et al.,

No. 82-1979 (D.C. Cir. November 29,

1983). (A-1).

JURISDICTION

The judgment from which review is

sought was entered by the United States

Court of Appeals for the District of

Columbia Circuit on November 29, 1983.

The Memorandum Opinion is set forth at

A-l.

The jurisdiction of this Court is

proper under 28 U.S.C. $1254(1), and

Supreme Court Rule 17.1(c) (1980) on the

basis that a federal court of appeals

has decided important questions of

federal law which have not been, but

should be, settled by this court.

STATUTES AND RULES INVOLVED

This suit involves application of

the following statutes and rules:

28 U.S.C. $1254(1) (1976)

Cases in the courts of appeals may

be reviewed by the Supreme Court by the

following methods:

(1) By writ of certiorari granted

upon the petition of any party to any

civil or criminal case, before or after

rendition of judgment or decree.

28 U.S.C. $1331 (Supp. IV 1980)

The district courts shall have

Original jurisdiction of all civil

actions arising under the Constitution,

laws, or treaties of the United States.

28 U.S.C. $1361 (1976)

The district courts shall have

original jurisdiction of any action in

the nature of mandamus to compel an

officer or employee of the United States

or any agency thereof to perform a duty

owed to the plaintiff.

30 U.S.C. §226(a) (1976)

All lands subject to disposition

under this chapter which are known or

believed to contain oil or gas deposits

may be leased by the Secretary.

30 U.S.C. §226-2 (1976)

No action contesting a decision of

the Secretary involving any oil and gas

lease shall be maintained unless such

action is commenced or taken within

ninety days after the final decision of

the Secretary relating to such matter.

No such action contesting such a decision

of the Secretary rendered prior to

September 2, 1960 shall be maintained

unless the same be commenced or taken

“age ninety days after September 2,

960.

31 U.S.C. $203 (1976)

All transfers and assignments made

of any claim upon the United States, or

of any part or share thereof, or interest

therein, whether absolute or conditional,

and whatever may be the consideration

therefore, and all powers of attorney,

orders, or other authorities for receiving

payment of any such claim, or of any

part of share thereof, except as herein-

after provided, shall be absolutely null

and void, unless they are freely made

and executed in the presence of at least

two attesting witnesses, after the

allowance of such a claim, the ascertain-

ment of the amount due, and the issuing

of a warrant for the payment thereof.

Such transfers, assignments, and

powers of attorney, must recite the

warranty for payment, and must be

acknowledged by the person making then,

before an officer having authority to

take acknowledgments of deeds, and shall

be certified by the officer; and it must

appear by the certificate that the

officer, at the time of the acknowledg-

ment, read and fully explained the

transfer, assignment, or warrant of

attorney to the person acknowledging

the same.

41 U.S.C. $15 (1976)

No contract or order or any interest

therein shall be transferred by the

party to whom such contract or order is

given to any other party and any such

ons

transfer shall cause the annulment of

the contract or order transferred so

far as the United States are concerned.

"Sole party in interest" means a

party who is and will be vested with all

legal and equitable rights under the

lease. No one is, or shall be deemed to

be, a sole party in interest with respect

to an application, offer or lease in

which any other party has any of the

interests described in this section.

The requirements of disclosure in dny

application or offer of an applicant's

or other parties' interest in a lease,

if issued, reflect the policy that all

applicants and other parties having an

interest in simultaneously filed lease

applications or offers to lease shall

have an equal opportunity for success in

the drawings to determine priorities

[sic]. Additionally, such disclosures

provide the means of maintaining adequate

records of acreage holding. An "interest"

in the lease includes, but is not limited

to, record title interests, overriding

royalty interests, working interests,

operating rights or options of any agree-

ments covering such "interests." Any

claim or any prospective or future claim

to an advantage or benefit from a lease,

and any participation or any defined or

undefined eghare in any increments, issues

or profits which may |\be derived from or

which may accrue in any manner from the

lease based upon or pursuant to any

agreement or understanding ggg at

the time when the application or offer

is filed, is deemed to constitute an

"interest" in such lease.

(a) The applicant shall set forth

on the lease offer, or lease application

if leasing is in accordance with Subpart

3112 of this title, or on a separate

accompanying sheet, the names of all

other parties who own or hold any

interest in the application, offer or

lease, if issued.

(b) A statement, signed by both

the offeror or applicant and the other

parties in interest, setting forth the

nature of any oral understanding between

them, and a copy of any written agreement

shall be filed with the proper Bureau of

Land Management office no later than 15

days after the filing of the offer, or

application if leasing is in accordance

with Subpart 3112 of this title. Such

statement or agreement shall be

accompanied by statements, signed by the

other parties in interest, setting forth

their citizenship and the!r compliance

with the acreage limitations of §§3101.1-5

and 3101.2-4 of this title.

43 C.F.R. §3112.2-1(£) (1981)

No person or entity shall hold own or

control any interest in more than one

application for a particular parcel.

— a

43 C.F.R. §3112.6-1(b) (1981)

Unqualified applicants. The

application of any applicant who is

unqualified or has not filed or caused

to be filed all evidence of qualifica-

tion required by Subpart 3102 of this

title shall be rejected.

Fed. R. Civ. P. 17(a)

Real Party in Interest. Every

action shall be prosecuted in the name

of the real party in interest. An

executor, administrator, guardian,

bailee, trustee of an express trust, a

party with whom or in whose name a

contract has been made for the benefit

of another, or a party authorized by

statute may sue in his own name without

joining with him the party for whose

benefit the action is brought; and when

a statute of the United States so

provides, an action for the use or

benefit of another shall be brought in

the name of the United States. No action

shall be dismissed on the ground that

it is not prosecuted in the name of the

real party in interest until a reasonable

time has been allowed after objection

for ratification of commencement of the

action by, or joinder or substitution

of, the real party in interest; and such

ratification, joinder, or substitution

shall have the same effect as if the

action had been commenced in the name of

the real party in interest.

Supreme Court Rule 17.l(c)

A review on writ of certiorari is

not a matter of right, but of judicial

discretion, and will be granted only

when there are special and important

reasons therefor. The following, while

neither controlling nor fully measuring

the Court's discretion, indicate the

character of reasons that will be

considered.

* * *

(c) When a state court or a federal

court of appeals has decided an important

question of federal law which has not

been, but should be, settled by this

Court, or has decided a federal question

in a way in conflict with applicable

decisions of this Court.

STATEMENT OF THE CASE

I. The Proceedings Below.

In March 1975, a lease of oil and

gas development rights was awarded to

one Norbert F. Albrecht pursuant to the

Mineral Leasing Act of 1920, 30 U.S.C.

$181, et seq. (1976). The lease was

designated Lease W50394. Subsequently,

Norbert F. Albrecht passed away, leaving

«

his interest in Lease W-50394 to his

brother, Raymond Albrecht.

Naartex Consulting Corporation

filed a protest with the United States

Department of the Interior, Bureau of

Land Management (hereinafter "BLM") on

September 14, 1979 protesting the

issuance of federal oil and gas Lease

W-50394. On September 28, 1979, the BLM

issued its decision denying the protest

of Naartex on the basis that: (1) none

of the unsuccessful applicants had

appealed the award of the lease to

Albrecht; (2) the assignees were

protected by their bona fide purchaser

status; (3) the producing oil and gas

lease could only be cancelled in suits

brought by the United States Attorney

General in the appropriate United States

“|

District Court; and (4) the interests in

this lease could only be set for sale by

competitive bid under the Mineral Lands

Leasing Act of 1920. (A-166).

Naartex appealed the decision of

the BLM to the United States Department

of the Interior, Office of Hearings and

Appeals, Interior Board of Land Appeals

(hereinafter "IBLA"). The IBLA issued

its decision on June 9, 1980 dismissing

the appeal on the basis that: (1)

cancellation of the lease required a

proceeding in Federal District Court

instituted by the United States Attorney

General; (2) the Department was prevented

from cancelling a lease held by a

qualified bona fide purchaser; and (3)

Naartex had no standing to maintain the

protest. Naartex's request for a fact-

finding hearing was denied by the IBLA.

(A-133).

. wo

On July 6, 1981, Naartex instituted

an action in the United States District

Court for the District of Columbia

seeking monetary damages and injunctive

relief for fraud and misappropriation

committed by the private defendants with

regard to the issuance and transfer of

Lease W-50394. In addition, Naartex

sought to overturn the decisions of the

BLM and IBLA. On September 30, 1981,

Naartex sought leave to amend its

Complaint. Naartex's uncontested motion

was granted by the District Court on

October 22, 1981.

The federal court had jurisdiction

over this matter pursuant to 28 U.S.C.

§§1331 and 1361 because plaintiff's

cause of action arises under the

Constitution and laws of the United

States. In addition, plaintiff brought

~ ¥% «

this action against an officer of the

United States in his official capacity,

and plaintiff sought to compel an officer

of the United States to perform a duty

owed to plaintiff.

The District Court dismissed

plaintiff's action on the basis that:

(1) there was no in personam jurisdiction

over the private defendants; (2) venue

was not proper; (3) there is no implied

private right of action under the Mineral

Leasing Act of 1920; and (4) Naartex's

suit violated the federal anti-assignment

laws under 31 U.S.C. §203 and 41 U.S.C.

§15. The District Court also denied

Naartex's motion to amend its complaint

to include Russell Huff, an unsuccessful

applicant for Lease W-50394, as a party

plaintiff. Naartex Consulting Corp. v.

a

Watt, 542 F. Supp. 1196 (D.D.C. 1982).

(A-77). In Naartex Consulting Corporation

v. James G. Watt, et al., No. 82-1979

(D.C. Cir. November 29, 1983) the Court

of Appeals affirmed the District Court's

dismissal of Naartex's action. The Court

of Appeals held that: (1) the District

Court lacked personal jurisdiction over

the private defendants; (2) venue does

not lie in the District of Columbia; (3)

the District Court did not err in

declining to transfer Naartex's claims

to another district where personal

jurisdiction and venue could be had

because Naartex failed to show that its

claims could properly be heard in any

federal court; (4) Naartex's claim

violated the federal anti-assignment

Statutes; and (5) the Mineral Leasing

—: oe

Act and regulations thereunder preclude

cancellation of a producing lease except

by judicial proceedings instituted by the

United States Attorney General. (A-1l).

Il. The Federal Oil and

Gas Leasing Program.

The United States Department of

Interior from time to time offers

parcels of federally-owned lands for

leasing by United States citizens

pursuant to the Mineral Leasing Act of

1920. 30 U.S.C. §181, et seq. (1976).

The period during which offers to lease

may be filed by qualified citizens is

known as a "simultaneous filing period";

the method by which’ a particular offer

is selected is by lottery. The lease is

awarded to the first qualified offeror

selected in the lottery. The issuance

of the lease confers upon the lessee the

- 16 -

right to exploit the oil and ane deposits,

if any, contained in the particular |

parcel of land.

The Secretary may decline to lease

a parcel of land after a drawing is held

and a qualified applicant is accepted.

McTierman v. Franklin, 508 F.2d 885, 887

(10th Cir. 1975). However, if the

Secretary decides to award a lease, he

must award it to the first drawee,

provided that the first drawee is

qualified under the regulations, and

provided that such drawee pays the first

year's rent under the lease within 15

days of notification of the lease award.

43 C.F.R. §$$3112.2-1, 3103.3-2 (1977).

In the event the first drawee

selected is determined to have been not

qualified, the lease is awarded to the

second drawee. If the second drawee is

o 1%

determined to have been not qualified,

the lease is awarded to the third drawee.

43 C.F.R. §§3112.2-1, 3112.4-1 (1977).

Only three drawing entry cards are drawn.

If none of the first three drawees

selected is qualified a new lottery is

held for that parcel of land. 43 C.F.R.

$3112.5-1 (1977).

Among the regulations issued by the

Department of Interior, to ensure that

each lottery is conducted fairly, is the

sole party in interest regulation formerly

set forth at 43 C.F.R. §3102.7 (1977)

(now set forth at 43 C.F.R. §$3102.2-7

(1981) and 3100.0-5(b) (1981)). The

sole party in interest regulation

requires that the identities of all

parties holding an interest in an offer

to lease be disclosed at the time of

filing.

—~ oe

Another regulation is the multiple

filing regulation formerly set forth at

13 C.F.R. §3112.5-2 (1975) (now set

forth at 43 C.F.R. §3112.2-1(f) (1981)).

The multiple filing regulation limits

offerors to one offer per drawing for a

particular parcel.

IIL. The Award of Lease W-50394.

In March 1975, a simultaneous

filing was held for a parcel of land

situated in the State of Wyoming, known

as Parcel W-484. Russell Huff

participated in the simultaneous filing

by submitting an offer. The filing

made by Norbert F. Albrecht was selected

first in the lottery. A lease of oil

and gas development rights appurtenant

to the land was issued to Norbert F.

Albrecht following a determination by

the Department of the Interior that he

= 2

was the first qualified offeror for

Parcel W-484. The lease was designated

Lease W-50394. Norbert F. Albrecht

later passed away leaving his interest

in Lease W-50394 to his brother Raymond

Albrecht, who was joined as a defendant

at plaintiff's request in the District

Court.

Resource Services Company (herein-

after "RSC"), during the 1975 Simultaneous

Filing Period, filed multiple offers to

lease mineral rights on behalf of various

clients. Apparently RSC had filed

approximately 200 offers out of

approximately 2,000 such offers filed

for Parcel W-484. Each offer to lease

was made pursuant to an identical agree-

ment between RSC and each of its clients

including Norbert Albrecht. The agree-

ments guaranteed RSC a variable percentage

o Mc

interest of 12 or 16 percent in all

profits realized upon a subsequent transfer

by such successful lottexy client to

another holder. The agreement further

provided that RSC was to act as its

client's sole and exclusive agent in all

negotiations of sales and transfers of

the lease away from the client. RSC's

percentage interest was undisclosed to

the Department of Interior at the time

RSC filed offers for Parcel W-484, in

violation of the sole party in interest

and multiple filings regulations of the

Department of the Interior.

Subsequent to the award of Lease

W-50394, Naartex entered into an agree-

ment with Russell Huff, whereby Huff

assigned all record title in Lease

W-50394 to Naartex retaining only a

percentage interest in any future proceeds

of the offer.

~ es

REASONS FOR GRANTING THE WRIT

I. The Court of Appeals Has Decided

Important Questions of Federal

Law Which Have Not Been and Should

Be Settled By This Court.

The private respondents have con-

mitted clear violations of the Mineral

Leasing Act of 1920. However, the

Secretary of the Interior has failed to

reject the unlawful filings of respondent

RSC; and the Court of Appeals has decided

that the Mineral Leasing Act of 1920

does not create an implied right of

action against the private defendants,

there is no common law cause of action

for fraud or unjust enrichment for

violations of the act, federal anti-

assignment laws prohibit Naartex from

seeking relief against the Secretary of

the Interior on behalf of applicant

Russell Huff, and denial of Naartex's

—

motion to join Russell Huff as a party

plaintiff need not have been granted

because such action would have been

futile. The decision of the Court of

Appeals from which review is sought,

thus, effectively forecloses the

availability of a meaningful remedy to

applicants for federal oil and gas

leases, and denies those applicants

their rights to equal and fair opportunity

to attain those leases.

Il. The Ability of the Government

to Conduct a Fair Process for

Issuing Federal Oil and Gas

Leases Has Been Severely

Impaired By the Decision of

the Court of Appeals.

The operation and administration of

the federal oil and gas leasing program

is charged by statute to the Department

of the Interior. 30 U.S.C. §226(a)

(1976). The Department has an explicit

» 3%.

",.. policy that all applicants and

other parties having an interest in

simultaneously filed lease applications

or offers to lease shall have an equal

opportunity for success in drawings to

determine priorities." 43 C.F.R.

§3100.0-5(b) (1981). Pursuant to chis

policy the Department has enacted

regulations which set forth specific

procedures for determining to whom leases

will be awarded. 43 C.F.R. §3100, et

seq.

The regulations set forth that only

qualified persons may hold an interest

in a lease. 43 C.F.R. §3112.6-1(b)

(1981). Among the requirements that

must be complied with by an applicant

for a lease are the sole party in

interest requirement and the multiple

filing requirement. 43 C.F.R. §3102.2-7

and §3112.2-1(£) (1981).

=.

The private respondents knowingly

violated the clear and unambiguous regula-

tions. The decision of the Court of

Appeals denying the petitioner a remedy

sanctions the award of leases to

unqualified parties who knowingly violate

regulations in order to increase their

chances of acquiring awards of leases.

Although the Court of Appeals for the

District of Columbia has recognized that

"an overarching policy of fairness is

intrinsic in the program," Lowey v.

Watt, 684 F.2d 957, 967 (D.C. Cir. 1982),

qualified and innocent participants in

the program are deniec a fair opportunity

to lease awards.

The Department of the Interior has

the responsibility to conduct its oil

and gas lottery programs so as to give

each applicant an equal opportunity to

win the lottery held for each lease.

a

It is a "departmental policy that all...

parties ... have an equal opportunity

for success in the drawings." 43 C.F.R.

§3100.0-5(b) (1981).

Under the Mineral Leasing Act leases

were originally awarded to the first

applicant, so theoretically each applicant

had an equal chance to submit its applica-

tion first. However, because this race-

to-che-land-office system became unwieldy,

the lottery system was instituted, under

which each applicant has, ideally, an

equal chance of winning.

Consistent with the departmental

policy that all applicants have an equal

opportunity for success in the drawing

the regulations prohibit any party from

having an interest in more than one lease

offer on any one parcel. 43 C.F.R.

$3100.0-5 (1981).

- Site

Furthermore, there are limitations

on how much public land one party can

lease at any one time. This is to ensure

that as many parties as possible have an

opportunity to obtain a lease without

making the leased areas too small to be

worth exploiting.

To facilitate the enforcement of

these regulations, it is required that

each applicant for a lease disclose all

parties who have, at the time the drawing

entry card (DEC) is filed, a legally

enforceable right to participate in the

proceeds of a lease. 43 C.F.R. §3102.2-7

(1981). Otherwise, the offer to lease

is void.

This disclosure requirement is not

just so much red tape that lease applicants

must contend with. Rather, the government

is entitled to know the identities of

ie «

parties who have acquired or seek to

acquire interests in federally owned

lands so that it can administer the

program fairly, keep accurate records,

and prevent multiple filings that create

unfair advantages. With thousands of

entry cards filed for each drawing, the

Secretary of the Interior should insist

on strict compliance with the regulations,

including the disclosure requirement, so

as to prevent unqualified parties from

obtaining leases through artifice, e.g.,

by using "straw men" to hide their

identities and to avoid detection of

their disqualifications.

In this case, respondent RSC devised

a scheme to circumvent these safeguards

designed to protect the integrity of the

system and ensure the availabiliity of

lease opportunities to the public on an

equitable basis.

« 26 «

It is clear that the service agree-

ments pursuant to which RSC filed entry

cards for its clients gave it an "interest"

in each lease won by its clients, for

the contracts gave RSC a legally enforce-

able right to share in the proceeds of

its clients' leases. Moreover, RSC knew

that its service agreement created an

interest in each lease because 43 C.F.R.

§3100.0-5 clearly says so. Further, RSC

was a party to two cases holding that

such contractual provisions constituted

interests, and RSC appealed neither

case. Lola I. Doe, 31 IBLA 394 (1977);

Sidney H. Schreter, et al., 32 IBLA 148

(1977).

Since at least 1967, the Interior

Department has held that exclusive sales

agency agreements entered into prior to

the time of a drawing must be disclosed.

« 3 <

John v. Steffans, 77 I.D. 146 (1967).

Also, the regulations require the dis-

closure of interests in leases. 43

C.F.R. §3102.7. Therefore, RSC was

required to disclose its interest in

every lease offer it filed, but it

knowingly failed to do so.

By such failure to disclose, RSC

was able to file multiple offers in the

names of various clients on the more

desirable parcels, thereby enhancing its

mathematical odds of acquiring an

interest in those parcels. Obviously,

if RSC files entry cards for over 200

clients on a single parcel, it has over

200 chances to acquire an interest, while

everyone else has one chance, except to

the extent that RSC's competitors practice

the same scheme.

i

Indeed, such schemes were not

uncommon. Oil companies, precluded by

the multiple-filing regulation from

using their enormous wealth to obtain any

greater chance at a particular parcel to

be leased than any average citizen would

have, could arrange with a leasing

service, such as RSC, to file a large

number of entry cards on a desirable

parcel, with the understanding that if a

client of the leasing service was awarded

the lease, the leasing service, as

exlusive agent, would sell the lease to

the oil company. Although the leasing

service and the oil company can profit

handsomely from such a scheme, the public

policy of equal opportunity of success

for all is severely compromised thereby.

—

Abuses of the system became so

widespread that on February 29, 1980,

the Secretary of the Interior issued an

order, No. 3049, suspending the issuance

of oil and gas leases under the lottery

program. A news release from the Office

of the Secretary, dated the same day,

quoted the Director of the Bureau of

Land Management to the effect that the

leasing system "has been subjected to

such thorough manipulation that the

possibility of lawful, bona fide

participants successfully obtaining a

lease in many cases been reduced to a

very low level."

Applicants for federal leases who

complied with the regulations have thus

been denied equal opportunity to obtain

awards of federal oil and gas leases.

Despite this denial, applicants for

— =

federal oil and gas leases have no

meaningful remedy available to them.

Ill. A Private Right of Action

Should Be Implied Under the

Mineral Leasing Act of 1920.

The traditional factors which this

Court uses to determine whether a private

right of action exists under a particular

Statutory or regulatory scheme indicate

that a private right of action should be

implied under the Mineral Leasing Act of

1920. Those factors are: (1) whether

the plaintiff is one of the class for

whose special benefit the statute was

enacted; (2) whether there is any

explicit or implicit indication of

legislative intent either to create such

a remedy or to deny one; (3) whether it

is consistent with the underlying purpose

of the legislative scheme to imply such a

remedy for the plaintiff; and (4) whether

> Si

the cause of action is one traditionally

relegated to state law. Cort v. Ash,

422 U.S. 66, 78 (1975).

A. Naartex and Huff are Members

of the Class For Whose Special

Benefit the Statute Was Enacted.

The Mineral Leasing Act of 1920 was

enacted to benefit the federal government,

by requiring the payment of rentals and

royalties to it for the production of

gas and oil on federal land and by

preventing the complete alienation of

oil and gas resources which had occurred

under the previous patent system, under

which the federal government was

compelled to convey a fee interest.

However, the Act was also designed to

benefit all oil and gas developers by

providing a fair, orderly system for

allocating federal lands for oil and gas

development. For example, on March 21,

. 7 «

1960, when certain amendments to

Sections 17 and 27 of the Mineral Leasing

Act of 1920 were debated on the floor of

the House of Representatives, Mr. Thomson

of Wyoming cited "the promotion of an

equitable distribution of benefits from

nationally owned resources" as one of

the objectives of the legislation.

Representative Thomson then went on to

say:

The Mineral Leasing Act

of 1920 itself very adequately

expresses its purpose as "An

act to promote the development

of coal, phosphate, oil, oil

shale, gas, and sodium on the

public domain." Under the act,

this has been accomplished to

a remarkable degree, to the

benefit of the Nation's economy

and security.

Hundreds of millions

of dollars of rentals and

royalties have accrued to

the U.S. Government from

oil and gas leasing. Mineral

leasing revenues in fiscal

year 1959 amounted to almost

$92.5 million.

—

Even more important than

this, the development has produced

an industry which has been in a

major way responsible for our higher

standard of living, has furnished

Federal and State revenues through

taxation, and has provided jobs to

a large amount of our population.

86 Cong. Rec. 6143 (1960) (remarks of

Rep. Thomson).

Russell Huff, and all participants

in federal oil and gas lease lotteries,

are the key to the smooth functioning of

the industry of which Mr. Thomson spoke.

If they are not protected under the

terms of the Mineral Leasing Act the

explicit purposes of promoting "an

equitable distribution of benefits from

nationally owned resources" and promoting

the development of mineral resources in

public land will be frustrated.

This purpose of benefiting parti-

cipants in federal oil and gas lotteries

<<

is also set forth in the regulations

promulgated pursuant to the Act:

* * *

The requirements of disclosure

in any application or offer of

an applicant's or other parties'

interest in a lease, if issued,

reflect the policy that all

applicants and other parties

having an interest in simultaneously

Filed lease applications or offers

to lease shall have an equal

opportunity for success in the

drawings to determine priorities

[sic]. Additionally, such

isclosures provide the means of

maintaining adequate records of

acreage holding. (emphasis added).

* * *

Naartex and Huff, as prospective,

eligible holders of an interest in Lease

W-50394, should be allowed to seek relief

1/ It was, of course, the violation of

this disclosure requirement, as well

as other violations, that led the

Department to cancel the lease

interests of defendant RSC and its

successful clients in numerous other

lease protests.

» SF ss

from the private defendants for their

violations of federal regulations under

the Mineral Leasing Act.

B. The Legislative History

of the Mineral Leasing

Act Indicates an Intent

to Create a Private Remedy.

General silence by Congress may be

construed to allow an implied right of

action.

This Court has stated:

When Congress intends private

litigants to have a cause of action

to support their statutory rights,

the far better course is for it to

specify as much when it creates

those rights. But the Court has

long recognized that under certain

limited circumstances the failure

of Congress to do so is not

inconsistent with an intent on

its part to have such a remedy

available to the persons benefited

by its legislation.

Cannon v. University of Chicago, 441 U.S.

677, 717 (1979) (under all four factors

of the Cort v. Ash test, Congress intended

— .

to create a private right of action

under Title IX of the Education

Amendments Act of 1972 to sue for

exclusion from a federally-financed

education program on the basis of sex).

As discussed above, the regulations

promulgated under the Mineral Leasing

Act have articulated a policy that is

implicit throughout the Act, namely that

all offerors for federal leases "shall

have an equal opportunity for success in

the drawings to determine priorities."

Congress necessarily intended that this

policy be enforced through the efforts of

private parties when it provided the

right to seek fuéteset review of all

decisions of the Secretary affecting

mineral leases. See 30 U.S.C. §226-2

(1976). Thus Congress intended that a

private right of action serve as an

—

additional tool, in conjunction with the

administrative process, to ensure fair

lease drawings.

C. A Private Right of Action

Would Be Consistent With the

Underlying Purpose of the Act.

One of the underlying purposes of

the Mineral Leasing Act is to promote

the public interest by developing mineral

resources contained in the land belonging

to the public and securing in return a

flow of royalties for the use of these

public lands. It would be entirely

consistent with this purpose to recognize

a private right of action for Huff,

Naartex, and others similarly situated.

If organizations and individuals such as

the private defendants are allowed to

continue their fraudulent activities,

the government will continue to lose

millions of dollars in uncollected

o sD. «

royalties from undisclosed interests.

Moreover, the Act does not provide a

method for forcing parties found guilty

of mineral lease fraud to yield up the

monies which they have received as a

result of their fraud. To allow private

parties, such as Naartex, to sue for

these ill-gotten proceeds would provide

an additional safeguard against manipula-

tion of the federal mineral leasing

program.

It does not follow that the

existence of a federal regulatory

enforcement scheme such as that created

under the Mineral Leasing Act of 1920

necessarily precludes the additional

enforcement tool of an implied private

right of action. A significant body of

case law decided by this Court exists in

which a private right of action has been

er

implied from a comprehensive federal

regulatory scheme. These private rights

of action have been implied in recogni-

tion of the fact that individuals whose

stake in the success or failure of a

federal program is particularly urgent

will be extremely effective in enforcing

fair play and compliance with the rules

for such programs.

Federal securities law, in which

shareholders are granted a private right

of action against corporations as to

violations of the applicable statutes

and regulations, provides an example of

a field where the use of the "private

attorney general" concept to combat

fraud has been particularly successful.

See J.I1. Case Company v. Borak, 377 U.S.

426, 430-31 (1964) (shareholder has an

implied right of action under §§14(a)

2

and 27 of the Securities Exchange Act of

1934 to sue for damages caused pursuant

to the solicitation of votes by a mis-

leading proxy statement); Ernst & Ernst

v. Hochfelder, 425 U.S. 185, 196-201

(1976), reh'g denied, 425 U.S. 986 (1976)

(purchaser or seller of a security has

the implied right under §10(b) of the

Securities Exchange Act of 1934 and SEC

Rule 10b-5 to sue for damages caused by

intentional deception practiced in

connection with such purchase or sale).

More recently, this Court has held

that a private right of action implied

under the Commodity Exchange Act of 1936

was preserved by the massive federal

regulatory scheme instituted by the

Commodity Futures Trading Commission Act

of 1974. Merrill Lynch, Pierce, Fenner

& Smith v. Curran, 456 U.S. 353 (1982).

~ oe:

Justice Stevens, delivering the opinion

of this Court, noted that the Commodity

Futures Trading Commission Act provided

substantial penalties for violations of

the statute as well as conferring broad

regulatory and enforcement powers upon

the newly-formed Commission, including

the power to seek injunctive relief for

. violation of provisions of the Act, the

power to alter or supplement the rules

of futures contract markets, and the

power to direct a contract market to

take whatever action was deemed necessary

by the Commission in an emergency. This

Court was nonetheless persuaded that the

additional tool of a private right of

action under the Commodity Futures

Trading Commission Act would be an

invaluable enforcement device, and found

nothing in the Act evidencing an intent

« £6 «

to do away with the private right of

action which had been construed by the

courts pursuant to the Commodity Exchange

Act of 1936. Id. at 1841-44.

Similarly, that the Mineral Leasing

Act of 1920 and the regulations

promulgated thereunder provide certain

remedies for violations of the act should

not deter this court from finding that

the additional tool of a private right of

action should also be implied under the

Act.

D. Plaintiffs' Cause of Action is

Not One Traditionally Relegated

to State Law.

Finally, plaintiffs' cause of action

is not of the type traditionally relegated

to state law. Controversies arising

under a federal program such as the

mineral leasing program should ideally be

» a >

adjudicated by the federal courts under

the provisions of the act establishing

the progran.

It is a paramount principle of

equity that a court will go much further

to grant relief when the public interest

is implicated than when solely private

interests are involved. Virginian

Railway Company v. System Federation No.

40, 300 U.S. 515, 552 (1937). Naartex

seeks to enforce a legislative policy in

favor of a fair, candid, and non-

fraudulent program of mineral rights

leasing. The present litigation involves

the public interest, and no other method

exists under the Mineral Leasing Act or

the Department's regulations of removing

the monetary incentive to abuse the oil

and gas leasing program.

« £6 «

IV. If There is No Private Right of

Action Under the Mineral Leasing

Act of 1920, Violation of the

Regulations Thereunder Should

Give Rise to a Common Law Cause

of Action For Fraud, Unjust

Enrichment or Conspriacy.

The Mineral Leasing Act of 1920 is

silent as to the disposition of the sums

accumulated by fraudulent leaseholders

during the period before cancellation.

Manipulators of the oil and gas leasing

system will have scant incentive to

reform until a private right of enforce-

ment aimed at forcing the disgorgement ™

of ill-gotten lease royalties is

recognized. However, even if this Court

finds that no such private right of

enforcement exists, Naartex and Huff

should be entitled to relief on the

ground of common law fraud, misappropria-

tion or conspiracy.

» AF &

The private respondents took, in

effect, 200 chances out of 2,000 to win

Lease W-50394, violated Department of

the Interior regulations in so doing,

and thus achieved collectively

$27,000,000 in revenue. Naartex and

Huff took only one chance and were

defrauded by the private respondents of

the benefit of that one chance. Naartex

and Huff should be entitled to damages.

Whether Naartex and Huff are awarded all

the profits or one share of the profits

along with others similarly situated, the

courts should attempt to render some form

of justice in this case.

The courts have a responsibility

and an interest in supplying a meaningful

remedy for rights it creates or guarantees.

Thus, this Court has previously ruled

that a private utility company had standing

~~ =

to sue on both theories of violation of

the Tennessee Valley Authority Act and

common law conspiracy to enjoin the TVA

from selling electricity to customers in

a particular area. Kentucky Utilities

Company v. Tennessee Valley Authority,

237 F. Supp. 502, 505 (E.D. Tenn. 1964),

aff'd sub nom., Hardin v. Kentucky

Utilities Company, 390 U.S. l, 6-7

(1968).

This equitable policy in favor of

affording relief wherever possible must

come to the forefront where, as here,

individuals and organizations have

accumulated substantial revenue by means

of fraudulently obtained interests in

oil and gas resources, and no measure

exists in the federal statute or

regulations to force the disgorgement

of such illegal proceeds.

o ft -«

The Mineral Leasing Act of 1920 and

the applicable regulations make no

provision for an accounting and disgorge

ment of the proceeds received pursuant

to illegal interests in oil and gas

leases. Only cancellation of the

interest by the government, to be

followed by competitive bidding or a

second lottery, are prescribed.

Cancellation of only one or two among

the numerous lease interests held by

large oil companies can offer no real

deterrent to the fraudulent, but profit-

able, behavior alleged by Naartex in its

amended complaint because the $27,000,000

in oil revenues extracted from the land

will remain in the hands of the private

appellees. Only by allowing suits to

recover for fraud and misappropriation

perpetrated by lease offerors or their

- 50 -

representatives, either as a private

remedy under the Mineral Leasing Act or

under common law theories, can the

policies implicit in the Act by fully

realized.

V. Naartex's Suit Against the

Federal Government Should Not

Be Deemed to Be Barred By the

Federal Anti-Assignment Laws,

or in the Alternative, Russell

Huff Should Be Permitted to

Intervene as a Matter of Right

in Order to Maintain the Action

in His Own Right.

A. Naartex Consulting Corporation

Has Standing to Litigate on

Behalf of Huff.

The court below held that the

agreement between the plaintiff and its

assignor, Russell Huff, violated the

federal anti-assignment laws, 31 U.S.C.

$203 (1976) and 41 U.S.C. $15 (1976).

The agreement between Naartex and Huff

simply does not fall within the ambit of

either of the anti-assignment statutes,

- 51 -

as it does not present any of the three

evils which these statutes were designed

to prevent. See generally United States

v. Sharon, 342 U.S. 288, 291-92 (1952);

United States v. Aetna Surety Company,

338 U.S. 366, 373 (1949).

The anti-assignment acts have not

been rigorously applied across the board.

It has been held that the federal anti-

assignment statutes do not apply to

ordinary leases of real estate by the

United States where, under the facts of

the case, the policies of the anti-

assignment provisions have not been

violated. Freedman's Savings and Trust

Company v. Shepherd, 127 U.S. 494, 505-06

(1888); United States v. Jordan, 186

F.2d 803, 808 (6th Cir. 1951), aff'd per

curiam, 342 U.S. 911 (1952). Thus the

statutes should not be applied to the

=

lease involved in the present case,

where no interest or right of the federal

government has been threatened or will

be threatened.

First, Naartex is not an organiza-

tion attempting improperly to influence

government officials. Instead, it is a

company designed to investigate fraud in

the complex, esoteric world of mineral

leasing and press claims on behalf of

injured persons through the proper

administrative channels, which are

available on equal terms to all similarly

situated persons. Neither does the

arrangement between Huff and Naartex

present any threat of duplicative claims

against the government. In fact, as

Huff has assigned all record title to

Naartex and now owns only a percentage

interest in any future proceeds of the

~ 3S «

offer he could not now bring a second

claim against the government in regard

to his offer; he must sue with Naartex

unless or until the company's interest

is deemed to fail and revert back to

him. Finally, no potentially valid

counterclaims or defenses exist against

Huff which might be lost through the

assignment to Naartex.

B. Even if Naartex Had No Standing,

Huff Was Entitled to Maintain

the Lawsuit in His Own Right.

In reviewing the District Court's

refusal to permit Huff to intervene, the

Court of Appeals found based on Fed. R.

Civ. P. 17(a):

No action shall be dismissed on the

ground that it is not prosecuted in

the name of the real party in interest

until a reasonable time has been

allowed after objection for ratifica-

tion of commencement of the action

by, or joinder or substitution of,

the real party in interest; and

such ratification, joinder, or

o Ma

substitution shall have the same

effect as if the action had been

commenced in the name of the real

party in interest.

(A-70).

The Court of Appeals, however,

found that the District Court correctly

found that joinder of Huff would have

been futile. (A-73).

To amend the complaint to join Huff

would not have constituted a futile act.

Even if Naartex's entire interest in all

claims could be deemed to fail under the

anti-assignment provisions, Huff would

still be able to maintain suit in his own

right.

Under established law, an attempted

assignment that fails to comply with the

anti-assignment provisions does not work

a forfeiture of the original claim.

See, e.g., Segal v. Rochell, 382 U.S.

o S% a

375, 384 (1966). Failure to comply with

the requisite formalities of these

statutes merely excuses the federal

government from recognizing the

assignment. See Segal v. Rochelle,

supra. Failure to meet the requirements

of the anti-assignment provisions does

not render the assignment invalid as

between the parties to the assignment.

McKenzie v. Irving Trust Company, 323

U.S. 365, 369 (1945).

Thus the original claim is

preserved and may still be sued upon

by the original claimant.

Conclusion

For the foregoing reasons, the

petition for writ of certiorari should

be granted.

=< 2

Respectfully submitted,

Daniel J. Piliero Il

Tighe, Curhan and Piliero

1750 Pennsylvania Ave., N.W.

Washington, D.C. 20006

(202) 628-0300

Attorney of Record for Naartex

Consulting Corporation

Of Counsel:

Eileen Malloy-Wall

Tighe, Curhan and Piliero

1750 Pennsylvania Ave., N.W.

Washington, D.C. 20006

Melvin E. Leslie

Ten Broadway Building

Suite 632

Ten West Broadway

Salt Lake City, Utah 84101

Dated: February 27, 1984

UNITED STATES COURT OF APPEALS

FOR THE\DISTRICT OF COLUMBIA CIRCUIT

No. 82-1979

NAARTEX CONSULTING CORPORATION, APPELLANT

RUSSELL HUFF

V.

JAMES E. WATT,

SECRETARY OF INTERIOR, ET AL.

Appeal from the United States District

Court for the District of Columbia

(Civil Action No. 81-01540)

Argued October 3, 1983

Decided November 29, 1983

Daniel J. Piliero II, with whom

Kathryn L. Mann was on the brief, for

appellant.

C. Michael Buxton, with whom Charles

D. Tetrault and B. Lee Ware for American

Natural Resources Co., et al., Gerry

Levenberg and Laura L. Payne for General

American Oil Co. of Texas, Thomas P.

Humphrey for James S. Harrell, and C.

Scott Crabtree, for Gordon L. Heele, et

al., were on the joint brief, for

appellees.

Jacques B. Gelin, Attorney, Department

of Justice, with whom Robert L. Klarquist,

Attorney, Department of Justice, was on

the brief, for appellee, James G. Watt,

Secretary of the Interior.

Thomas W. Ehrmann, Wayne E. Babler,

Jr. and Charles A. Grube were on the

brief, for appellee, Fred L. Engle d/b/a

Resource Service Company.

Jerome C. Muys and John F. Shepherd,

for Davis Oil Company, Raymond Shibley,

Brian D. O'Neill and Daniel J. Conway for

Panhandle Western Gas Co., Raymond G.

Larroca, Thomas Carr and William C.

Anderson for Reading & Bates Petroleum

Co., were on the joint brief, for

appellees. Eric B. Carlson also entered

an appearance for appellee, Davis Oil

Company.

Richard G. Morgan, Martha Priddy

Patterson, and Charles W. Garrison were

on the brief, for appellee, Raymond G.

Albrecht.

Before: WALD and BORK, Circuit

Judges, and DAVID W.

WILLIAMS*, Senior District

Judge for the Central

District of California.

Opinion for the Court filed by

Circuit Judge WALD.

WALD, Circuit Judge: This action

begins with a lottery, held in Wyoming in

1975 by the Department of Interior to

select a lessee for a parcel of land in

Wyoming that was, at the time, outside

any known producing oil or gas field.

Two years later, the land began producing

oil; and two years later still, Naartex

Consulting Corporation (Naartex), acting

* Sitting by designation pursuant to

Title 28 U.S.C. $294(d).

A-4

on behalf of an unsuccessful applicant in

the lottery, challenged the issuance of

the lease. Naartex claimed that Resource

Service Company (RSC), the filing service

that had entered the winning application

on behalf of Norbert Albrecht, had retained

an interest in many applications in the

lottery, including Albrecht's, in violation

of the legal limit of one application per

personl/, and that Albrecht and RSC had

intentionally concealed this fact.

Naartex also alleged that subsequent

purchasers of interests in the lease had

secretly conspired with Albrecht to pre-

arrange their acquisitions before the

1/ Under 43 C.F.R, §3112.2-1(f£) (1982),

"[nJo person or entity shall hold,

own or control any interest in more

than one application for a particular

parcel.”

lease was issued, also in violation of

the regulations.2/ After pursuing

administrative remedies, Naartex filed

this action in the district court,

primarily seeking damages from the

private defendants, and mandamus relief

against the government to order the

cancellation of the lease.

The district court dismissed the

complaint on numerous procedural grounds,

set forth infra at 7. For the reasons

explained below, we affirm.

2/ See 43 C.F.R. §$3112.4-3 (1982)

("No application, offer, lease or

interest therein may be transferred

or assigned prior to the issuance of

the Least « « ods

A - 6

I. BACKGROUND

In March 1975, the Wyoming State

Office of the Bureau of Land Management

(BLM) held a "simultaneous oil and leasing”

lottery pursuant to 43 C.F.R. §$3112 et

seq. (1982) for the rights to lease a

parcel of Wyoming land not "within any

known geological structure of a producing

oil or gas field." Mineral Leasing of

1920, $17(b), 30 U.S.C. §226(b).3/

Norbert F. Albrecht won the lottery, and

on June 1, 1975 the BLM issued to him

lease number W-50394. One month later,

Albrecht assigned his entire title to the

lease to J.S. Harrell, while retaining

3/ For a detailed description of the

simultaneous oil and gas leasing

program, see Lowey v. Watt, 684

F.2d 957, 960-61 (D.C. Cir. 1982).

a five percent royalty interest in the

lease. Numerous subsequent assignments

of drilling rights, reservations and

transfers of royalty interests followed.

In 1977, a producing well began operations

on the leased land.

On January 25, 1979, Alvin Abrams,

as president of Geosearch, Inc., filed

with the BLM a protest challenging the

issuance of the lease to Albrecht. The

Geosearch protest - filed in the name of

all unsuccessful applicants in the lottery

for lease W-50394 - claimed that Albrecht's

initial application violated the Department

of Interior (DOL) regulations mandating

disclosure in all lease applications of

"the names of all other parties who own

or hold any interest in the application,

offer or lease, if issued." 43 C.F.R.

$3102.2-3. Geosearch protested that

Albrecht had an undisclosed service

agreement with Fred Engle, d/b/a Resource

Service Company (RSC) when he filed his

lease application, and that his service

agreement constituted an "interest in the

lease" that must be disclosed.4/ This

4/ Under Albrecht's service agreement,

RSC gained exclusive brokerage rights

to sell any lease that Albrecht might

win. Whether RSC acted as broker or

Albrecht negotiated a sale himself,

RSC would receive 16% of the first

$100,000 and 12% thereafter of any

selling price or royalty payments for

five years. See RSC Service Agreement

with Norbert Albrecht, reprinted in

Statement of Reasons on Beha °

Resource Services Company, Inc. app.

C., Matter of Raymond Albrecht, IBLA

No. 80-867 (Oct. 6, 1980). The

Interior Board of Land Appeals, two

vears after the lottery for lease

W-50394, held that such service

agreements create "interests" in

lease applications, and that filing

(FOOTNOTE CONTINUED ON NEXT PAGE)

A-9

BLM dismissed this protest on February 6,

1979 on various grounds, and on May 6 the

Interior Board of Land Appeals (IBLA)

dismissed Geosearch's appeal because a

statement of reasons for the appeal had

not been filed.5/

(FOOTNOTE CONTINUED FROM PAGE A-9)

services entering multiple applications

pursuant to such agreements consequently

violate the prohibition against holding

interests in more than one application

for a given lease. See Sidney H.

Schreter, 32 IBLA 148 (1977); Lola I.

Doe, 31 IBLA 394 (1977). In these

decisions, the Interior Department

refused to issue leases to RSC clients.

After the Doe and Schreter decision,

RSC altered {ts agreements to conform

with BLM policy. See Lowey v. Watt,

684 F.2d at 963.

See Letter from Glenna M. Lane, Chief,

O{I and Gas Section of Wyoming BLM to

Alvin Abrams, President of Geosearch,

Inc. (February 6, 1979), reprinted in

Joint Appendix of Appellees (J.A.A.)

at 13-14; Order (May 6, 1979),

reprinted in J.A.A. at 15.

A - 10

—

Four months later, on September 19,

1979, Abrams filed another protest against

the issuance of lease W-50394, this time

as the president of Naartex.6/ Naartex

based its protest upon rights assigned to

it by Russell Huff, an unsuccessful

applicant in the 1975 lottery. On

September 28, 1979, BLM dismissed the

protest on the grounds that (1) Huff

retained no interest in the lease because

he failed to challenge its issuance within

30 days, (2) subsequent title transfers

Naartex and Geosearch share the same

address, and Alvin Abrams is president

of both companies. Both Naartex and

Geosearch are in the business of

protesting the issuance of public

land leases on behalf of unsuccessful

lease applicants. See Naartex

Consulting Corp. v. Watt, 542 fF.

Supp. 1196, 1198 (D.D.C. 1982);

Geosearch, Inc. v. Andrus, 508 F.

Supp. 839, 841 (D. Wyo. 1981).

A - ll

Oe ne ne ae ee

of the lease rendered its new holders

“bona fide purchasers” whose interests

may not be cancelled even though the

initial lease holder may have violated

the Mineral Leasing Act7/, and (3) sections

27(h)(1) and 31(a) of the Mineral Leasing

Act, 30 U.S.C. $$184(h)(1), 188(a),

preclude the cancellation of a "producing

lease” such as W-50394.8/ The IBLA

dismissed Naartex's subsequent appeal on

7/ See 43 C.F.R. $3108.3(c) (1982) ("A

Tease or interest therein shall not

be cancelled to the extent that such

action adversely affects the title or

interest of a bona fide purchaser

even though such lease or interest,

when held by a predecessor in title,

may have been subject to cancellation."™)

8/ See Letter from Glenna M. Lane, Chief,

O{T and Gas Section of Wyoming BLM to

Naartex (Sept. 28, 1979), reprinted

in Naartex Appendix (N.A.) at -30.

A - 12

June 9, 1980 for the same reasons,

noting also that, Naartex "ha[d] not

shown that the service agreement

alleged to exist between [RSC] and

Albrecht" constituted an "interest" that

should have been disclosed pursuant to

the regulations.9/

9/

See 48 IBLA 166 (1980). The IBLA

explained that RSC works with at

least two different types of service

agreements, only one of which

constitutes an “interest” in the

lease application, compare Sidney H.

Schreter, 32 IBLA 148 P1577) (RSC

service agreement that constitutes an

interest) with Geosearch, Inc., 39

IBLA 49 (1975) (RSC service agreement

that does not constitute an interest),

and that Naartex had failed to show

which type of agreement Albrecht had

Signed. See 48 IBLA at 173. While

Naartex, in administrative proceedings

and in this action, submitted an RSC

service agreement that it asserted to

be Albrecht's, the name of the

applicant on these exhibits is

unintelligible because the signatures

(FOOTNOTE CONTINUED ON NEXT PAGE)

A - 13

On September 8, 1980, Naartex

petitioned the IBLA for reconsideration

of its decision. The IBLA denied “he

petition on September 18 because the

peition was not "filed promptly” in

accordance with Department regulations.10/

Next, on December 12, Naartex petitioned

the Secretary of Interior to review the

(FOOTNOTE CONTINUED FROM PAGE A-13)

are not reproduced clearly. See,

e.g., Complaint 424 and Exhibit A,

reprinted in N.A. at 5, 25. However,

introduced the Albrecht service

agreement in another IBLA docket,

revealing it to be the type of

agreement that, under IBLA precendents,

constitutes an interest in Albrecht's

lease application. See supra note 4.

10/ 43 C.F.R $4.126 (1982) provides that

motions for reconsideration "shall

be filed within 30 days from the

date of receipt of a copy of the

Board's decision."

A - 14

appeal; on April 6, 1981, Undersecretary

Hodel denied the peition, finding the

IBLA decision "to be a persuasive" and

conclusive disposition of the issues in

this case.11/

Naartex filed a complaint in the

district court on July 6, 1981, claiming

that the administrative failure to cancel

lease W-50394 was arbitrary and capricious

and a deprivation of property without due

process of law. The complaint also sought

damages from various private defendants

for "intentionally deceiv[ing] the

Department and all other offerors for

parcel W-484 [i.e., lease W-50394]," and

for violating DOI disclosure regulations.12/

ll/ See N.A. at 42.

12/ Amended Complaint 477, reprinted in

N.A. at 15.

A- 15

The district court summarily dismissed

the action on the grounds that: (1) the

court lacked personal jurisdiction over

the private defendants, (2) venue did not

lie in the District of Columbia, (3) the

private defendants were indispensable

parties to the action, (4) the Mineral

Leasing Act creates no private right of

action, (5) the Anti-Assignment laws, 31

U.S.C. §203 and 41 U.S.C. $15, bar Naartex

from asserting Huff's claims against the

government, (6) Huff himself should not

be permitted to join or intervene in this~

action because he failed to challenge the

lease issuance in a timely manner, and

because intervention should not be employed

to cure an otherwise futile action, and

(7) Naartex and Huff both lacked standing

A- 14

to challenge the lease issuance. See

Naartex Consulting Corp. v. Watt, 542 F.

Supp. 1196 (D.D.C. 1982).

We affirm. The district court lacked

personal jurisdiction over the private

defendants, who are indispensable parties

to this action. Venue also does not lie

in this district. In addition, the

district court was not obliged to transfer

this action to another district where

personal jurisdiction and venue could be

had, because Naartex's claims suffer from

serious substantive defects. Thus the

district court properly dismissed the

claims against the private defendants.

As to the claims against the government,

the district court also correctly chose

to dismiss. Naartex runs afoul of federal

A- 17

anti-assignment statutes when it attempts

to assert claims against the government

on the basis of an assignment by Russell

Huff, an unsuccessful lease applicant.

Moreover, joinder of Huff to avoid the

anti-assignment prohibition would have

been futile. The Mineral Leasing Act and

regulations thereunder preclude cancellation

of a producing lease - such as W-50394 -

except by judicial proceedings instituted

by the Attorney General in the district

where the leased land is located. Finally,

because the private defendants are

indispensable parties to the action to

cancel the lease, the action may not

proceed in their absence.

A - 18

Il. THE CLAIMS AGAINST

THE PRIVATE DEFENDANTS

Counts IV through VII of Naartex's

amended complaint seek declaratory and

injunctive relief and money damages from

a variety of private defendants. These

defendants include Raymond Albrecht, the

brother and successor in interest of

Norbert Albrecht, the winner of the 1975

lottery; RSC, the filing service that

allegedly entered the Albrecht lease

application without disclosing its own

interest in that application; and numerous

companies and individuals that gained

interest in lease W-50394 after its

issuance.

We believe the district court acted

properly when it dismissed these counts.

The district court lacked personal

A- 19

jurisdiction over these defendants.

Moreover, proper venue for these claims

does not lie in the District of Columbia.

Finally, the district court had good

reason to dismiss this case, rather than

transfer it to another district.

Personal Jurisdiction

The district court correctly held

that it lacked personal jurisdiction over

the numerous private defendants. None of

the defendants resides or is incorporated

in the District of Columbia. To establish

personal jurisdiction, then, Naartex must

show that the defendants had the requisite

"contacts" with the District. The District

of Columbia "“long-arm" statute, D.C. Code

Ann. $13-423, enumerates the possible

bases for personal jurisdiction over

nonresidents. Section 423(a)(1) extends

A - 20

personal jurisdiction to persons "transacting

any business in the District of Columbia";

section 423(a)(4) extends to any person

"causing tortious injury in the District

of Columbia by an act or omission outside

the District of Columbia if he regularly

does or solicits business, engages in any

other persistent course of conduct, or

derives substantial revenue .. . in the

District of Columbia." These provisions

are limited by section 423(b), which

states that "only a claim for relief

arising from the acts enumerated in this

section may be asserted against him."

Thus "section 423(b) ... bar[s]...

claims unrelated to the acts forming the

basis for personal siustotien.* Willis

v. Willis, 655 F.2d 1333, 1336 (D.C.Cir.

1981).

A - 21

While Naartex in its pleadings in

the district court contended that the

defendants’ acts in securing and transferring

the lease "were intended to have an impact

in this District,13/ we cannot reasonably

conclude, and Naartex does not here

contend, that any "tortious injury” in

the District forms the basis for this

action. Personal jurisdiction may be

exercised over the private defendants,

therefore, only if they “transact[ed]

business" in the District in connection

with the operative facts of this action.

13/ Opposition of Plaintiff Naartex to

Defendants’ Motion to Dismiss the

Amended Complaint at 39.

Naartex puts forward three possible

"contacts™ that they say establish the

basis for personal jurisdiction over the

defendants. First, they point to an

office located in the District, operated

by defendant American National Resources

Company, where defendant Michigan Wisconsin

Pipeline Company lists its name on the

door and maintains a D.C. Telephone

listing. See Naartex Brief at 20-21.

Yet Naartex has failed to allege any

activities emanating from this office

that gave rise to its claims in this

case. Furthermore, according to the

uncontradicted affidavit of Daniel Tr.

Collins, the office "“monitor[s]

legislative and regulatory matters" and

“maintains[s] official contacts with the

Congress and the executive branch."

Joint Appendix of Appellees (J.A.A.)

at 3l.

Until recently, we thought - as the

district court here ruled - that under

the law of the District of Columbia,

personal jurisdiction could not be founded

upon any kind of "government contacts,"

i.e., “getting information from or giving

information to the government, or getting

the government's permission to do

something." Investment Co. Institute v.

United States, 550 F.Supp. 1213, 1216-17

(D.D.C. 1982); see Naartex Consulting

Corp., 542 F. Supp. at 1199; see also

Fandel v. Arabian American Oil Co., 345

F.2d 87, 89 (D.C. Cir. 1965); Ramamurti

v. Rolls-Royce, Ltd., 454 F. Supp. 407,

A - 24

410-11 (D.D.C. 1978), aff'd mem., 612

F.2d 587 (D.C. Cir. 1980). Indeed, in

1978, the District of Columbia Court of

Appeals, sitting en banc, said:

to permit our local courts to assert

personal jurisdiction over nonresidents

whose sole contact with the District

consists of dealing with a federal

instrumentality not only would pose

a threat to free public participation

in government, but also would threaten

to convert the District of Columbia

into a national judicial forum.

Environmental Research International,

Inc. v. Lockwood Greene Engineers, Inc.,

355 A.2d 808, 813 (D.C. 1976). That

holding would certainly preclude personal

jurisdiction over American Natural

Resources and Michigan Wisconsin Pipeline

in this case. Two years later, however,

a panel of the same court appeared to

limit the "government contacts" exception

to activities implicating first amendment

A - 25

rights. See Rose v.Silver, 394 A.2d

1368, 1373-74 (D.C. 1978). In denying

rehearing en banc in the Rose case, the

full court failed to explain or reconcile

the apparent conflict with the Environmental

Research opinion, one judge finding none,

and two other judges calling for the

explicit rejection of the panel opinion

in Rose. See Rose v. Silver, 398 A.2d

787 (D.C. 1979). Since that time, the

court has failed to clarify any possible

conflict. In as much as the denial of

rehearing is evidence that no irreconcilable

tension exists between the en banc opinion

and a subsequent panel opinion, and

considering that a panel of the District

of Columbia Court of Appeals “is prohibited

from issuing an opinion which conflicts

materially with a prior decision of {the

A - 26

full] court as this may be done only by

the court sitting en banc,” Rose v. Silver,

398 A.2d 787, 787 (D.C. 1979) (denying

petition for rehearing) (citing M.A.P. v.

Ryan, 285 A.2d 310 (D.C. 1971)), if it

were necessary to determine what law

controls today in the District of Columbia,

we would still be hesitant to conclude

that the clear holding against governmental

contacts as a basis for personal jurisdiction

in Environmental Research no longer

controls. See Bernhardt v. Polygraphic

Co. of America, 350 U.S. 198, 204-05

(1956); id. at 209-12 (Frankfurter, J.,

concurring.)

A - 27

Fortunately, if there is any tension

between Environmental Research and Rose,

we need not resolve it, because in this

case all relevant activities upon which

Naartex seeks to base its claim - contacts

upon which they must also rely to establish

long-arm jurisdiction under the section

423(a)(1) “transacting business" provision,

see, e.g., Berwyn Fuel, Inc. v. Hogan,

399 A.2d 79, 80 (D.C. 1979) (per curiam);

Bueno v. La Compania Peruana de Radiodifusion,

S.A., 375 A.2d 6, 9 (D.C. 1977); D.C.

Code §13-423(b) - implicate the first

amendment guarantee "to petition the

Government for redress of grievances” and

so would qualify for exemption under the

Rose test as well. U.S. Const. amend. I.

Naartex contends that American Natural

A - 28

Resources and Michigan Wisconsin "made

personal appearances before the Interior

Department" as a part of their allegedly

fraudulent scheme, and that this activity

forms the basis for personal jurisdiction.

Naartex Brief at 21. These appearances,

made in an attempt to influence government

action as to lease W-50394, undoubtedly

qualify as exercise in petitioning the

government. See, e.g., California Motor

Transport Co. v. Trucking Unlimited, 404

U.S. 508, 510 (1972) ("Certainly the

right to petition extends to all departments

of Government."); Doe v. McMillan, 566

F.2d 713, 718 (D.C. Cir. 1977) ("This

right is not limited to petitioning

Congress but extends to administrative

agencies and to the courts."), cert.

denied, 435 U.S. 969 (1978).

A - 29

Further, Naartex claims that American

Natural Resources and Michigan Wisconsin

made their administrative appearances

"not in order to engage in privileged

lobbying activities, but simply to protect

the[ir] lease." Naartex Brief at 21.

However, the companies' defense of their

rights before a governmental body is no

less a "petition" simply because they

sought to protect their proprietary

interests from an adverse regulatory

decision, or because Naartex in this

action seeks to strip them of those very

interests. A different case might be

presented had Naartex made credible and

specific allegations in the district court

that the companies had used the proceedings

as an instrumentality of the alleged

A - 30

fraud. The hour has passed for Naartex

to raise such allegatios now.14/

14/

In the district court, Naartex

argued: "[{iJf, as the plaintiff con-

tends, the defendants joined a con-

spiracy to defraud the public and the

Department, those acts were intended

to have significant impact in this

District, without question. Thus

all defendants are properly before

the court in this case." Opposition

of Plaintiff Naartex to Defendants'

Motion to Dismiss the Amended Complaint

at 39. In its amended complaint,

Naartex alleged that "RSC implemented

[its] multiple filing scheme pursvant

to a conspiracy with defendants

Harrell, Michigan Wisconsin, American

and General." Amended Complaint

136, reprinted in N.A. at 7. Both

statements, and numerous others

made in the district court, intimate

that the conspiracy Naartex sought

to redress occurred outside the

disrict - most likely in Wyoming,

where the lottery and the alleged

multiple filings took place. Naartex

now appears to alter its view of

the facts in order to obtain personal

jurisdiction over the defendants. See

Naartex Brief at 15 ("in the District.

of Columbia, where the fraud clearly

occurred"); id. at 25 ("the most

substantial part of the private

defendants fraudulent acts occurred

here [in the District of Columbia]").

A - 31

Finally, Naartex claims that RSC has

submitted to service of process in the

District by registering "to do business"

here. Naartex Brief at 21. As we noted

above, however, Naartex must also show

that RSC's contacts with the District

form at least part of the basis for its

claims. Naartex has failed to do so

here.

We also note that Naartex lists

thirteen private defendants in its

complaint - all nonresidents of the

District - but alleges no "contacts" with

the District concerning ten of then,

beyond the bald speculation that these

ten were "alleged co-conspirators." Id.

at 22. Such a conclusionary statement

does not constitute the prima facie

A - 32

showing necessary to carry the burden of

establishing personal jurisdiction.

See, e.g., McLaughlin v. McPhail, 707

F.2d 800, 806 (4th Cir. 1983) ("bare

allegation" of "fraudulent conspiracy"

insufficient); Greenspan v. Del E. Webb

Corp., 634 F. 2d 1204, 1208 n.5 (9th Cir.

1980) ("a plaintiff must allege specific

acts connecting defendant with the

forum"); Lehigh Valley Industries, Inc.

v. Birenbaum, 527 F.2d 87, 93-94 (2d.

Cir. 1975) ("the bland assertion of

conspiracy or agency is insufficient to

establish [personal] jurisdiction").

Naartex next asserts that the district

court committed reversible error by

denying permission to conduct additional

discovery for the purpose of establishing

personal jurisdiction. Discovery under

the Federal Rules of Civil Procedure is,

of course, broad in scope and freely

permitted. See Fed. R. Civ. P. 26(b)(1)

advisory committee note. At the same

time, however, "[a] district court has

broad discretion in its resolution of

discovery problems that arise in cases

pending before it." In re Multi-Piece

Rim Products Liability Litigation, 653

F.2d 671, 679 (D.C. Cir. 1981). The

district court did not abuse its discre-

tion when, as here, Naartex had "ample

15/ In its brief, Naartex argues that it

had no adequate opportunity for

discovery because it “served its

discovery requests within a month of

the filing of the last motion to

dismiss." Naartex Brief at 28 n.13.

The time of the last motion to

(CONTINUED ON NEXT PAGE)

A - 34

opportunity” to take discoveryl5/, Zerilli

v. Smith, 656 F.2d 705, 716 (D.C. Cir.

1981), and the pleadings contained no

allegations of specific facts that could

establish the requisite contacts with the

District, see McLaughlin v. McPhail, 707

F.2d at 807 ("Finding no prima facie

(CONTINUED FROM PAGE A-36)

dismiss is irrelevant to the question

whether Naartex was afforded sufficient

opportunity for discovery. Naartex

was put on notice that personal

jurisdiction would be challenged

over six months before the dismissal

of this case. See Memorandum in

Support of Defendants' Joint Motion

for Extension of Time, and Suggestion

to the Court at 1 (filed Sept. 2,

1981) ("The undersigned defense

counsel, having reviewed the complaint,

believe that several initial

dispositive defenses exist with

regard to the i of the

complaint. These defenses include

- « « lack of personal jurisdiction

. © a. pe

A - 35

showing of conspiracy .. . the district

court properly exercised its discretion

in denying the discovery"); Lehigh Valley

Industries, 527 F.2d at 93-95 ("no abuse

of discretion in the denial of discovery"

in face of "the bland assertion of

conspiracy"). We accordingly uphold the

district court's determination that the

private defendants were not subject to

personal jurisdiction in the district,

and its denial of further discovery.16/

16/ Naartex also contends that further

discovery was essential to establish

whether an implied right of action

exists under the Mineral Leasing

Act. See Naartex Brief at 25-27.

Because the question whether to

imply a private statutory right of

action primarily concerns legislative

intent - and not the particular

facts of any given case - this

contention lacks any merit.

A - 36

We also approve the district court's

finding that these defendants are

"indispensible parties" within the ambit

of Fed. R. Civ. P. 19(b). Numerous cases

hold that “an action seeking rescission

of a contract must be dismissed unless

all parties to the contract, and others

having a substantial interest in it, can

be joined." Acton Co. v. Bachman Foods,

Inc., 668 F.2d 76, 81-82 (lst Cir. 1982);

see Northrop Corp. v. McDonnell Douglas

Corp., 705 F.2d 1030, 1044 (9th Cir.),

cert denied, 52 U.S.L.W. 3265 (1983);

Crouse-Hinds Co. v. Internorth, Inc., 634

F.2d 690, 701 (2d Cir. 1980); Chiodo v.

General Waterworks Corp, 380 F.2d 860,

866-67 (10th Cir.), cert denied, 389

U.S. 1004 (1967). More specifically,

A - 37

parties who hold royalty interests,

assignments, or interests in the title

of federal leases, in the absence

of special circumstances not present

here, are indispensable parties in an

action to cancel the lease or to try

title to the lease. See, e.g., Dotty v.

St. Mary Parish Land Co., 598 F.2d 885,

887-88 (5th Cir. 1979); Lomayaktewa v.

Hathaway, 520 F.2d 1324, 1325-26 (9th

Cir. 1975); cert. denied sub nom.

Susenkewa v. Kleppe, 425 U.S. 903

(1976). All private defendants in this

action hold proprietary interests in

— W-50394, which Naartex seeks to

cancel. Thus these defendants are

indispensable parties, and the jlistrict

court properly refused to proceed with

A - 38

the action in their absence, considering

the availability of an alternative forum

in Wyoming where personal jurisdiction

might be achieved. See Fed. R. Civ. P.

19(b).

Venue and Transfer

Naartex contends that even if the

district court lacks personal jurisdiction

over the private defendants, the dismissal

of the action constitutes an abuse of

discretion. Instead, Naartex argues, the

district court should have transferred

the case to Wyoming, where personal

jurisdiction and venue would lie.

We note, to begin with, that venue

for this action does not lie in the

District of Columbia. When, as here,

subject matter jurisdiction "is not

A - 39

founded solely on diversity of

citezenship," venue lies only in "the

judicial district where all defendants

reside, or in which the claim arose

» « «” 28 U.S.C. §1391(b). Because no

defendants in this action, except

perhaps the Secretary of Interior, reside

in the District of Columbia, and because

Naartex's claim did not arise in the

District of Columbial7/, venue does not

lie here.

17/ Of the many events underlying this

action, the district court found

only one - the rejection by

Undersecretary Hodel of Naartex's

petition to review the IBLA decision

- that occurred in the District of

Columbia. See Naartex, 542 F.Supp.

at 1201. On the other hand, the

great weight of significant events

relating to this action occurred in

Wyoming: the land is located there,

and the lottery and lease issuance

took place there. Furthermore, none

(CONTINUED ON NEXT PAGE)

A - 40

Naartex nevertheless asserts that

the district court was obliged to transfer

this case pursuant to 28 U.S.C. §1406(a),

which provides that "[t]he district court

of a district in which is filed a case

laying venue in the wrong division or

district shall dismiss, or if it be in

the interest of justice, transfer such

case to any district or division in which

it could have been brought."

(CONTINUED FROM PAGE A-40)

of the private parties to this

action reside in the District of

Columbia. Thus, whether one uses

the “significant contacts" test,

see Lamont v. Haig, 590 F.2d 1124

(D.C. Cir. 1978), or the "place of

injury" test, see Rosenfeld v. S.F.C.

Corp., 702 F.2d 282, 284 (lst Cir.

1983) (quoting D.N.H. 1973)), the

claim in this case undoubtedly arose

in Wyoming. See Leroy v. Great

Western United Corp., 443 U.S. 173,

185-86 (1979).

A - 41

A court may transfer a case to

another district even though it lacks

personal jurisdiction over the defendants.

See, e.g., Goldlawn, Inc. v. Heiman, 369

U.S. 463, 466 (1962). The decision

whether a transfer or a dismissal is in

the interest of justice, however, rests

within the sound discretion of the district

court. See, e.g., Cook v. Fox, 537 F.2d

370, 371 (9th Cir. 1976); Hayes v. RCA

Service Co., 546 F. Supp. 661, 665 (D.D.C.

1982). See generally 15 Wright & Miller,

Federal Practice and Procedure §3827, at

170 (1976). We find that the district

court did not abuse its discretion by

dismissing this action, because as

explained below, Naartex failed to show

that its claims - both the implied

A - 42

statutory right of action and the common

law fraud claims - could properly be

heard in any federal court. In Light of

the substantive problems with its asserted

claims, Naartex's additional objection

that the case should have been transferred

to another federal court is Likewise

without merit.

First, the Mineral Leasing Act of

1920 does not create an implied right of

action against the private defendants.

As noted many times, when determining

whether an implied right of action exists

under a federal statute, legislative

intent is the dispositive factor. See,

e.g., Jackson Transit Authority v. Local

Division 1285, Almagamated Transit Union,

457 U.S. 15, 22 (1982); Transamerica

A - 43

Mortgage Advisors, Inc. v. Lewis, 444

U.S. 11, 24 (1979).

In enacting the Mineral Leasing Act,

Congress did not express any intention to

create a statutory private right of action

to enforce compliance with the disclosure

requirements found in the DOI lease

lottery regulations. Congress' central

purpose in enacting the Mineral Leasing

Act was the establishment of an orderly

system by which the federal government

could control the leasing of public land:

Prior to 1920, oil and gas rights in

public lands were acquired in the

same way as rights in other minerals

- by a form of "location." One

staked out a location and prospected

for oil or other minerals; upon

making a discovery, he became entitled

to a patent to the land as well as

the minerals.

A - 44

The Mineral Leasing Act of 1920

changed the precedure for acquiring

oil and gas rights in public lands:

The Secretary was empowered to issue

prospecting permits and required, in

the event a discovery was made under

the permit, to isue a lease...

Udall v. Tallman, 380 U.S. 1, 21-22

(1965)18/: see also Catifornia Co. ve

Udall, 296 F.2d 384, 388 (D.C. Cir. 1961)

("The Act was intended to provide wise

development of these natural resources

and to obtain for the public a reasonable

financial return on assets that 'belong'

to the public.") Accordingly, the

statutory scheme confers upon the Secretary

18/ In 1935, Congress eliminated the

prospecting permit system and

instituted the present direct

leasing system. Act of August 21,

1935, 49 Stat. 676, 677, 30 U.S.C.

§§223, 226.

A - 45

of Interior authority to administer the

leasing program as "the statutory guardian

of this public interest." Id. (footnote

omitted). The Secretary, and not the

citizenry at large, was intended to

oversee the proper allocation and

development of the public lands.

Furthermore, section 27 of the Act

expressly authorizes cancellation of the

lease, acquired in violation of the Act

only through an "appropriate proceeding

instituted by the Attorney General." 30

U.S.C. §184(h)(1). Considering the

"elemental canon of statutory construction

that where a statute expressly provides a

particular remedy or remedies, a court

must be chary of reading others into it,"

Transamerica Mortgage Advisors, Inc. v.

A - 46

Lewis, 444 U.S. 11, 19 (1979), we hold

that no implied cause of action of the

sort Naartex asserts exists under the

Mineral Leasing Act.19/ See National

19/ Naartex asserts that, in the absence

of an implied right of action, there

will be "no real deterrent" to

fraudulent lease applications. We

disagree. First, 18 U.S.C. §1001

makes it a crime’ punishable by up to

five years imprisonment and $10,000

fine "knowingly and willfully [to]

conceal [] or cover [] up by any

trick, scheme or device a material

fact, or [to] make [] any false,

fictitious or fraudulent statements

or representations" in “any matter

within the jurisdiction of any

department of agency of the United

States." Mindful of this prohibition,

the BLM has directed its officers to

refer fraudulent lease applications

for "investigations for prosecutions

under 18 U.S.C. 1001." 43 C.F.R.

§3112.6-l(e) (1982). Also, fruadulent

applications will often violate the

mail and wire fraud statutes. See

18 U.S.C. §$1341, 1343.

Finally, the BLM system of protests

and cancellation offers a substantial

(CONTINUED ON NEXT PAGE)

A - 47

Railroad Passenger Corp. (Amtrack) v.

National Association of Railroad Passengers,

414 U.S. 453, 458 (1974) ("when legislation

expressly provides a particular remedy or

remedies, courts should not expand the

coverage of the statute to subsume other

remedies"); Pullman v. Chorney, 712 F.2d

(CONTINUED FROM PAGE A-47

deterrent. The 30-day time

limitation for protests is tolled

so long as the fruad is concealed.

When a party "has been injured by

fraud and ‘remains in ignorance of

it without any fault or want to

diligence or care on his part, the

bar of the statute does not begin to

run until the fraud is discovered

-'" Holmberg v. Armbrecht, 327

U. S. 392, 397 (1946) (¢ wottn Bailey

Vv. Glover, 88 U.S. (21 342,

348 (1874)). And it is well

established that "(t]Jhis equitable

doctrine is read into every federal

statute of limitations. Id.; see

Fitzgerald v. Seamans, 553 F.2d 220,

228 (D.C. Cir. 1977); ILGWU v. NLRB,

463 F.2d 907, 922 (D.C. Cir. 1972).

(CONTINUED ON NEXT PAGE)

A - 48

447, 449-50 (lOth Cir. 1983) (finding

no private right of action under the

Mineral Leasing Act because "the Act

itself implies that there should

(CONTINUED FROM PAGE A-48)

In this case, however, neither

Naartex nor Huff filed a protest

within 30 days after a reasonably

diligent person would have discovered

the suspected fraud related to lease

W-50394. As noted supra at 4,

Geosearch instituted a protest very

similar to this one on January 25,

1979, almost eight months before

Naartex initiated its protest. The

Geosearch protest put Huff on notice

that the lease mifht have been

fruadulently obtained. Also, despite

the close identity of the two

corporations, the pendency of the

Geosearch action does not toll the

30-day limit for Naartex, because

BLM dismissed the protes*: due to

Geosearch's failure to prosecute.

See supra at 5. Even if the Geosearch

action tolled the limitation period

as to Naartex, IBLA dismissed the

Geosearch protest on May 6, 1979,

over four months before Naartex

initiated its protest.

A - 49

be no further private remedy since 30

U.S.C. $184(b) [sic] (1) (1976) authorizes

the Attorney General to bring an action

for the forfeiture of any lease acquired

in violation of the Act.")

Naartex in its brief also objects to

the district court's failure to determine

“whether its amended complaint stated

» « « &@ cause of action for fraud,

misappropriation or unjust enrichment"

under the common law. We believe, however,

that the district court did not abuse its

discretion when it failed to address,

and thereby sub silentio failed to

transfer, the common law fraud claim.

In the first place, Naartex itself

failed to make clear in the district

court that it sought to pursue a claim

A - 50

for common law fraud separate and apart

from its private right of action under

the Mineral Leasing Act. For example,

the district court concluded that Naartex

had "concede[d] that its action against

the private defendants assumes the

existence of an implied private right of

action in the Mineral Leasing Act of

1920." 542 F. Supp. at 1202. To reach

this conclusion, the district court relied

upon Naartex's somewhat enigmatic statement

that the defendants "will not be required

under the Act to disgorge these illegal

proceeds unless the court recognizes a

private right of action under the Act and

enters a judgment based on common law

fruad." Reply in support of Joint Motion

for Russell Huff to Intervene or Be Joined

A - 51

as a Party Plaintiff at 2 (quoted in

Naartex, 542 F. Supp. at 1202). Naartex

made numerous other statements in the

district court that appear to place

complete reliance upon a private statutory

right of action in support of its claims

against the private defendants. See,

e.g., id, at 2-3 (Naartex and Huff "are

now seeking two basic forms of relief.

First is the implication of a private

right of action under the Mineral Leasing

Act of 1920 .. . Second, .. . plaintiff

and Huff are also seeking judicial review

of the decisions of the Secretary of the

Interior denying plaintiff a hearing and

cancellation of the lease."); Opposition

of Naartex to Defendants' Motions to

Dismiss the Amended Complaint at 15

A - 52

("plaintiff's cause of action is not of

the type traditionally relegated to state

law .. . state law could not provide a

remedy for plaintiff's harms."); id. at

21 (Naartex's and Huff's property right

“adheres [sic] in the administrative

process itself, i.e., the right to a

fair, untained, oil and gas leasing

program as prescribed in the Mineral

Leasing Act and the regulations prom-

ulgated pursuant to the Act.") (empahsis

added).

Moreover, Naartex's amended complaint

does not make out any clear allegations

of common law fraud. Cf. Fed. R. Civ. P.

9(b) ("the circumstances constituting

fraud or mistake shall be stated with

particularily"). Instead, in its complaint

A - 53

Naartex repeatedly alleged regulatory

violations in support of its claims

against the private defendants. See

Amended Complaint 477 (RSC's and Albrecht's

lease applications "were invalid under

the applicable regulations"); id. 187

(American Natural Resources' and Michigan

Wisconsin's interests in lease obtained

"in violation of Department regulations") ;

id. 4116 (RSC "violat[ed] Department

prohibitions against multiple filings") ;

id. 94123 (RSC, Harrell, Michigan Wiscnsin,

American Natural Resources, and General

American Oil Co., "conspired to violate

Department regulations governing the

issuance and transfer of federal mineral

leases"). At best, Naartex's complaint

intertwined its purported common law

claims and its asserted private statutory

A - 54

right of action to such a degree as to

shroud its common law fraud claim from

the view of a reasonably diligent eye.

We therefore find that the district court

did not abuse its discretion in failing

expressly to address the common law

claims.

Furthermore, even if the district

court had discerned the separate claim

for common law fraud, it would properly

have dismissed the claim. Because the

court's federal question jurisdiction was

predicated upon a nonexistent private

right of action under the Mineral Leasing

Act, the district court should dismiss

any state claims pendent to the defective

federal claim. As the Supreme Court set

it down, in the absence of diversity

jurisdiction, "if the federal claims are

dismissed before trial, even though not

a © 39

insubstantial in a jurisdictional sense,

the state claims should be dismissed as

well." United Mine Workers of America v.

Gibbs, 383 U.S. 715, 726 (1966).

Of course, there might have been an

independent jurisdictional basis for

hearing the state claims if diversity

jurisdiction had been adequately estab!.ished

in the Naartex amended complaint. In its

amended complaint, however, Naartex

neither alleged that 28 U.S.C. §1332

extended jurisdiction to the district

court over this case, nor did it plead

the requisite facts to establish complete

diversity.20/ Because federal courts

20/ Fed. R. Civ. P. 8(a)(1) requires

that the complaint contains a short

and plain statement of the grounds

upon which the court's jurisdiction

depends ..." The Naartex amended

complaint stated only that "(t]his

court has jurisdiction in this matter

(CONTINUED ON NEXT PAGE)

A - 56

SO I ee ES

are of limited jurisdiction, there is a

presumption against the existence of

(CONTINUED FROM PAGE A-56)

pursuant to 28 U.S.C. §§1331(a)

[federal question jurisdiction] and

1361 [mandamus jurisdiction]. . ."

Amended Complaint 41, reprinted in

N.A. at 2. No mention is made of

diversity jurisdiction or 28 U.S.C.

§1332.

Furthermore, the facts alleged in

the amended complaint do not establish

diversity jurisdiction. To establish

diversity jurisdiction, one must

plead the citizenship of the corporate

and individual parties. Naartex

failed to do so. Under 28 U.S.C.

§1332(c), “a corporation shall be

deemed a citizen of any state by

which it has been incorporated and

of the state where it has its

principal place of business." Yet

the Naartex amended complaint fails

to allege the principal place of

business for any of the corporate

parties to this action. See Amended

Complaint 443-15, reprinted in N.A.

at 2-4. Furthermore, as to the

individual defendants, Naartex

alleged merely the states of residence.

See Amended Complaint 148, 9, 13,

(CONTINUED ON NEXT PAGE)

A - 57

diversity jurisdiction. See 13 Wright &

Miller, Federal Practice and Procedure

$§3522, 3611 (1975). Accordingly, the

party seeking the exercise of diversity

jurisdiction bears the burden of pleading

the citizenship of each and every party

to the action. See, e.g., Owen Equipment

& Erection Co. v. Kroger, 437 U.S. 365

(1978); Anderson v. Watt, 138 U.S. 694,

702 (1891). After three attempts, however,

(CONTINUED FROM PAGE A-57)

16, 17, reprinted in N.A. 3-4. Yet

it has been held repeatedly that

an allegation of residence alone is

insufficient to establish the

citizenship necessary for diversity

jurisdiction. See 13 Wright &

Miller, Federal Practice and Procedure

$3611, at 706 (1975), and cases

cited therein.

A - 58

and after notice that diversity jurisdiction

should be shown, Naartex failed to meet

this burden.21/ We therefore find the

21/ Naartex sought leave to file a second

amended complaint on March 15, 1982.

Four months earlier, defendant RSC

had brought to the district court's

attention the first amended complaint's

deficiency in pleading diversity

jurisdiction. See Statement of

Points and Authorities in Support of

[RSC's] Motion for Judgment on the

Pleadings at 12-13 (Asserting that

"Naartex's amended complaint fails

to properly allege the facts upon

which this Court could exercise

diversity jurisdiction" and pointing

out that "a plaintiff must allege

both a corporate defendant's state

of incorporation and the state

wherein its principal place of

business is located") (emphasis in

original). In its pleadings, Naartex

claimed that its second amended

complaint would "meet RSC's objections

to the jurisdictional allegations of

the amended complaint." Opposition

Complaint at 37. The second amended

complaint, however, failed to remedy

this defect entirely, see Second

Amended Complaint 414 (no allegation

of Panhandle Western Gas Company's

principal place of business), and

(CONTINUED ON NEXT PAGE)

A - 59

district court would have been justified

in dismissing the common law claim on

this alternative gound.

Finally, we note that Naartex did

not allege all the elements necessary to

make out a common law fraud action. In

order to state a claim for common law

fraud, the plaintiff must allege that the

fraud caused him damage: “neither fraud

(CONTINUED FROM PAGE A-59)

persisted in alleging the "residence"

rather than "citizenship" of

individuals, see id. 193, 8, 9, 13,

16, 17.. While we are cognizant that

"[djefective allegations of jurisdiction

may be amended," 28 U.S.C. §1653,

courts are not obliged to indulge

litigants indefinitely, especially

when their amendments constitute

futile gestures. See Foman v. Davis

371 U.S. at 182; Jackson v. Salon,

614 F.2d 480, 492 (10th Cir. 1979);

Holman v. Carpentry Technolcgy Corp.,

484 F. Supp. 406, 409 (E.D. Pa.

1980), and cases cited therein.

A - 60

without damage nor damage without fraud

is sufficient to support an action." 37

Am. Jur. 2d, Fraud & Deceit §12, at 34;

see Securities and Exchange Commission v.

Capital Gains Research Bureau, Inc., 375

U.S. 180, 192 (1962); Mariner Water

Renaturalizer of Washington, Inc. v. Aqua

Purification Systems, Inc. 665 F.2d 1066,

1070-71 (D.C. Cir. 1981). Furthermore,

damages are "restricted in all cases to

such damages as were the natural and

proximate consequences, or the direct

consequences, of the fraud, and to such

damages as can be clearly defined and

ascertained." 37 Am. Jur. 2d, Fraud &

Deceit §343, at 461; see Day v. Avery,

548 F.2d 1018, 1028 (D.C. Cir. 1976),

cert. denied. 431 U.S. 908 (1977).

A - 61

Naartex, however, has failed to

allege "any causal connections between

the [fraud] and the injury which [Naartex]

charges." Day v. Avery, 548 F.2d at

1028. This court recently described the

workings of the simultaneous oil and gas

lottery:

All applications filed before the

deadline are deemed to have been

filed simultaneously, and the BLM

office holds a drawing early in each

month to award the leases. Three

applications are drawn for each

parcel. If the person filing the

first-drawn application qualifies to

hold the lease, the lease is awarded

to that person; if not, it is awarded

to the second-drawn applicant, and

so forth.

Lowey v. Watt, 684 F.2d 957, 960 (D.C.

Cir. 1932). Russell Huff, whose interest

Naartex seeks to represent in this action,

was not one of the three applicants

selected in the 1975 lotrery for lease

A - 62

W-50394. Accordingly, in the absence

of the alleged fraud, the lease would

have been assigned to the second or

third drawn applicants, and not to Huff.

thus, the alleged fraud could possible

have caused Huff any damage only if the

second and third drawn applicants were

also unqualified to receive lease W-50394,

in which case "the lands under consideration

would again be put up for lease in the

next drawing." Geosearch, Inc. v. Andrus,

508 F. Supp. 839, 843 (D. Wyo. 1981).

Because Naartex did not allege that the

second and third drawn applicants were

not qualified to receive lease W-50394,

therefore, the complaint failed to make

out the causation and damage elements

A - 63

necessary to support a claim for common

law fraud.22/

22/ Naartex could conceivably have alleged

that the presence of unqualified

applicants in the lottery reduced

Huff's chances of placing among the

first three applicants selected. But

even this characterization of causation

and damage does not survive scrutiny.

First, the regulations provide for

review of the qualifications of

applicants only after the selection

takes place. See 43 C.F.R. §3112.6-1

("Rejection is an adjudicatory process

which follows selection"). The lottery

rules do not prohibit the expansion of

the applicant pool by applicants who

might, for example, have exceeded the

allowable acreage limitation, see id.

§3101.1-5(a), or who are not citizens

of the United Statec, see id. §3102.2,

or, as here, who ensered a service

agreement later found to be an

"interest" in the lease application.

The rules of the lottery, therefore,

do not establish a legally protected

interest in a pristine applicant pool.

Moreover, it is elementary that

"speculative" damage will not support

an action for common law fraud.

See, e.g., Day v. Avery, 548 F.2d

at 1028; 37 Am. Jur., Fraud & Deceit

$343, at 461. Naartex's notion

that the alleged fraud by Albrecht

and RSC deprived Huff of lease

W-50394 is indeed quite speculative.

A - 64

To sum up, we find that the district

court acted within its sound discretion

when it dismissed the claims asserted

against the private defendants. We

now turn to review the district court's

dismissal of the claims against the

government.

IIL. THE CLAIMS AGAINST THE GOVERNMENT

In three counts of its complaint23/,

Naartex seeks declaratory and mandamus

relief against the Secretary of the Interior.

In so doing, Naartex purports to assert the

rights of Russell Huff; Naartex itself did

not participate in the 1975 lottery. The

district court found such vicarious claims

to be "a classic violation of the federal

23/ See Amended Complaint 1944-73, re-

printed in N.A. 9-14 (Counts I-TITT).

A - 65

anti-assignment laws." 542 F. Supp. at

1203. We agree.

Section 3727 (formerly 203) of title

31 provides that "a transfer or assignment

of any part of a claim against the United

States Government or of an interest in

the claim" may be made “only after [the]

claim is allowed, tne amount of the claim

decided, and a warrant for payment of the

claim has been issued." Furthermore, any

such assignment "must be attested to be 2

witnesses." 31 U.S.C. §3727(b). Huff's

agreement by letter to "sell, assign and

transfer to [Naartex] all of [Huff's]

rights in and to lease #W-50394"24/

clearly contravenes these provisions.

Such inchoate interests in the government

24/ Letter from Russell Huff to Naartex

at 2 (Sept. 10, 1979).

A - 66

lease may not be assigned, and, in any

event, the attempted assignment was not

witnessed as required by the statute.

In addition, Section 15 of title 41

provides that "[nJo contract or order, or

any interest therein, shall be transferred

by the party to whom such contract or

order is given to any other party..."

this section evidently prohibits the

transfer of Huff's asserted "interest" in

lease W-50394 to Naartex.25/

25/ 41 U.S.C. $15 also provides that

- “any such transfer shall cause the

annulment of the contract or order

transferred, so far as the United

States is concerned." Because of

the disposition of this case on

other grounds, and because the

parties did not address the issue in

briefs or at argument, we need not

decide whether this provision operates

to extinguish Huff's claims against

the government altogether.

A - 67

Naartex argues that these provisions

do not apply to the Huff assignment

because "the policies of the anti-assignment

provisions have not been violated" in

this instance. Naartex Brief at 44. Yet

for almost a century it has been repeatedly

emphasized that a central purpose of both

31 U.S.C. §3727 and 41 U.S.C. §15 was

"that the government might not be harassed

by multiplying the number of persons with

whom it had to deal." Hobbs v. McLean,

117 U.S. 567, 576 (1886); see United

States v. Shannon, 342 U.S. 288, 291-93

(1952); Scanwell Laboratories, Inc. v.

Thomas, 521 F.2d 941, 944 n.2 (D.C. Cir.

1975), cert. denied, 425 U.S. 910 (1976).

The Huff assignment unquestionably violates

this clearly articulated policy.

A - 68

Naartex further contends that, in

the event the anti-assignment laws

invalidate the Huff assignment, the

district court should have permitted Huff

to be joined in order to pursue his own

claims. While the district court acted

properly in denying Naartex's motion to

join Huff as a party plaintiff, we disagree

with certain reasons offered by the court

in support of the denial.

The district court refused to permit

Huff to intervene in part because "(t]he

attempt to add Huff as a party plaintiff

represents an obvious effort to revitalize

a suit which Naartex would otherwise have

no basis for litigating due to the

operation of the anti-assignment laws."

542 F. Supp. at 1205. This ruling,

A - 69

however, overlooks the mandate of Fed. R.

Civ. 2. i7Ca):

No action shall be dismissed on the

ground that it is not prosecuted in

the name of the real party in interest

until a reasonable time has been

allowed after objection for ratification

of commencement of the action by, or

joinder or substitution of, the real

party in interest; and such

ratification, joinder, or substitution

shall have the same effect as if the

action had been commenced in the

name of the real party in interest.

Because the Anti-Assignment laws invalidate

Huff's attempted transfer of his claims

against the government to Naartex, he may

represent the “real party in interest" in

this action. In such cases, as a general

rule, joinder within a reasonable time

should be permitted, and the complaint

may be amended, substituting the new

plaintiff.

A - 70

In this case, however, the district

court's denial of the joinder motion was

justified by additional considerations.

The Supreme Court has concluded that

leave to amend pleadings, which is

necessary to effectuate the joinder of a

party plaintiff, need not be granted when

such action would be "futilf[e]." Foman

v. Davis, 371 U.S. 178, 182 (1962); see

Parker v. Baltimore & Ohio Railroad Co.,

652 F.2d 1012, 1018-20 (D.C. Cir. 1981)

(reviewing proposed amendment to determine

whether amendment would be futile); In re

Ampicillin Antiturst Litigation, 82 F.R.D.

647 (D.D.C. 1979). The district court

correctly determined that the joinder of

Huff to assert his claims against the

government "would be utterly futile."

542 F. Supp. at 1206.

A- 71

Lease W-50394 became a producing

lease in 1977. See supra at 4. According

to 43 C.F.R. $3108.3(b) (1982), "[a]

lease known to contain valuable deposits

of oil or gas may be cancelled only by

judicial proceedings in the manner provided

in section 27 and 31 of the Act."

Similarly, under 30 U.S.C. §188(b), leases

are "subject to cancellation by the

Secretary of Interior . .. unless or

until the land covered by any such lease

is known to contain valuable deposits of

oil or gas." Therefore, as the district

court observed, "[l]lease W-50394 cannot

be cancelled administratively because it

is a currently-producing oil and gas

lease." 542 F. Supp. at 1205. A producing

lease may be cancelled only through an

A - 72

"appropriate proceeding instituted by the

Attorney General," 30 U.S.C. §184(h) (1),

or "an appropriate proceeding in the

United States district court for the

district in which the property, or some

part thereof, is located," id. §188(a).

Mr. Huff is not the Attorney General and

lease W-50394 does not cover land in the

District of Columbia. We therefore find

that the district court acted properly in

denying the joinder of Huff to this action

because such joinder would have been

futile.

Finally, as we noted above, see

supra at 14-15, the private defendants

constitute indispensable parties to the

action to cancel the lease. Because the

private defendants could not properly be

haled before the district court, see

A - 73

supra at 8-13, then, the entire action

must be dismissed.

The district court thus correctly

dismissed the claims against the government.

IV. CONCLUSION

For the reasons set forth above, the

order of the district court dismissing

this action is

Affirmed.

A - 74

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 82-1979 September Term, 1983

Civil Action No.

Naartex Consulting 81-01540

Corporation,

Appellant

Filed November 29, 1983

Russell Huff George A. Fisher, Clerk

Ve

James E. Watt, Secretary

of Interior, et al.

It is ORDERED, sua sponte,

that the Clerk shall withhold issuance

of the mandate herein until seven days

after disposition of any timely petition

for rehearing. See Local Rule 14, as

amended on November 30, 1981 and June

15, 1982. This instruction to the Clerk

A - 75

is without prejudice to the right of any

party at any time to move for expedited

issuance of the mandate for good cause

shown.

For the Court

George A. Fisher

Clerk

A - 76

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

)

NAARTEX CONSULTING CORP., )

)

Plaintiff, )

)

Vv. ) Civil Action

) No. 81-1540

JAMES E. WATT, Secretary )

of Interior, et al. ) Filed June 8,

) 1982

Defendants. ) James F.

) Davey,

Clerk

MEMORANDUM OPINION

This matter is before the court

on both governmental and private

defendants' motions to dismiss and on

the joint motion of plaintiff and Russell

Huff to intervene as a party plaintiff

and to file a second amended complaint

adding Russell Huff as a party plaintiff.

For the reasons expressed below,

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defendants' motions are granted and

plaintiff's and Russell Huff's motion

is denied.

I. Facts

Under the Department of the

Interior's simultaneous oil and gas

leasing program, administered pursuant

to the Mineral Leasing Act of 1920, 30

U.S.C. §226(c), all offers to lease

particular classes of parcels, are

considered as having been simultaneously

filed. Priority among the parcels is

determined by a random drawing in which

three applications are selected. The

lease is awarded to the first qualified

application of the three offers chosen.

if all three applications are not

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qualified under DOI's regulations, no

lease is issued and a new drawing is

held.

In the case at bar, a drawing

was held and lease number W-50394 was

issued to the first of the three

applications chosen at random, an

application submitted by Norbert F.

Albrecht. The lease was issued in March,

1974. Various assignments of drilling

rights, reservations and transfers of

royalty interests have occurred, which

accounts for the large number of private

defendants involved in this suit.

On January 25, 1979, Alvin

Abrams, president of Geosearch, Inc.

filed, in the Bureau of Land Management

(BLM), a protest against the issuance of

the lease to Albrecht. The basis for

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the protest was that Albrecht had a

service agreement with Fred Engle, d/b/a

Resource Service Company, a defendant in

this suit, in violation of Interior

Department regulations. In support of

the protest, Abrams contended he was

representing the entire class of persons

who had filed unsuccessful offers for

lease W-50394. On February 6, 1979, the

BLM dismissed the protest on various

grounds. Geosearch filed a notice of

appeal and this appeal was dismissed by

the Interior Board of Land Appeals (IBLA)

on May 6, 1979, because no statement of

reasons for the appeal had been filed.

On September 19, 1979, Abrams

filed a second protest, this time as

president of Naartex Consulting

Corporation, plaintiff in the instant

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suit. this protest was based upon an

agreement between Naartex and Russell

Huff, another unsuccessful applicant for

the lease in question. The agreement

provided that in consideration for the

transfer to Huff's interest in the lease

to Naartex, Naartex would attempt tc

vindicate the "rights of all members of

the class of persons who filed offers,"

through proceedings before the DOI and

federal and state courts and would pay

Huff 25% of the gross amount realized

through its efforts.

On September 28, 1979, the BLM

dismissed Naartex' [sic] protest. Naartex'

appeal from this decision on October 29,

1979 was dismissed by the IBLA on June

9, 1980. On September 8, 1980, plaintiff

petitioned the Board of Land Appeals to

reconsider its initial decision dismiss-

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ing plaintiff's appeal; the petition for

reconsideration was denied by the IBLA

on September 16, 1980. Finally, on

December 12, 1980, plaintiff filed a

petition with the Secretary of the

Interior to review the decision of the

IBLA; this petition was denied on April

6, 1981.

The instant suit was commenced

on July 6, 1981, contending that the

agency's denial of relief constituted an

abuse of discretion, and seeking to have

the agency's decisions set aside and the

lease in question cancelled. Plaintiff

also seeks to have the court find that

the private defendants committed fraud

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in violation of the Mineral Leasing Act

and order that the defendants’ ill-gotten

gains be paid into a suspense account

with the court or other appropriate

party.

This action must be dismissed

for a number of compelling reasons.

ll. Discussion

A. Jurisdiction and Venue

The District of Columbia Code

sets out a number of possible basis for

the exercise of in personam jurisdiction

over corporations and persons not having

their principal place of business or

residence in the District. Since there

is no suggestion that there has been any

tortious injury in the District, the

only plausible basis for an exercise of

jurisdiction over the private defendants

in this case is that they transact

business in the District. D.C. Code

§13-423(a)(4). For this basis to apply,

plaintiff must demonstrate nee caly that

the defendants have transacted business

in the District, but also that claims

pursued by plaintiff arose out of the

business transacted here. D.C. Code

§13-423(b); see generally Security Bank,

N.A. v. Tauber, 347 F. Supp. 511 (D.D.C.

1972).

Most private defendants contend

that they do not transact business here

and that none of plaintiff's claims

arise from any scattered contacts they

may have had with the District in the

past. A few of the private defendants

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acknowledge that they do have certain

contacts with the District, but, by way

of affidavits, these defendants have

sworn that any contacts with the District

are limited to involvements with the

federal government. See Affidavit of

American Natural Resources Company and

Michigan Wisconsin Pipeline Company.

Thus, these contracts would fall within

the "government contacts" exception to

the District of Columbia lLong-arm statute

and would not qualify these private

defendants for in personam jurisdiction.

See, e.g., Siam Kraft P. Co. Ltd. v.

Parsons & Whittemore, Inc., 400 F.

Supp. 810 (D.D.C. 1975), aff'd, 521

F.2d 324 (D.C. Cir. 1975).

Plaintiff contends that it

should be permitted to conduct discovery

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before the court concludes that it cannot

exercise jurisdiction over the private

defendants. This response is unper-

suasive. First, plaintiff's complaint

has not even alleged facts that would

allow the court to conclude that there

is personal jurisdiction over most of the

private defendants. Even granting

plaintiff's complaint the most liberal

construction and furnishing it "the

benefit of all inferences that can be

derived from the facts alleged," Schuler

v. United States, 617 F.2d 605, 608

(D.C. Cir. 1979), the complaint does not

withstand the motions to dismiss by most

of the private defendants. See 4 C.

Wright & A. Miller, Federal Practice and

Procedure, §1068 at 250 (1969); American

Contract Designers, Inc. v. Cliffside,

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Inc., 458 F. Supp. 735 737 (S.D.N.Y.

1978); Ghazoul v. International Management

Services, Inc., 398 F. Supp. 307, 309

(S.D.N.Y. 1975).

In these circumstances,

allowing plaintiff to conduct even limited

discovery into the contacts of private

defendants with the District would be

unjustified. Plaintiff has not alleged

the "'threshold' jurisdiction sufficient

to demonstrate the fairness of allowing

the suit to continue." American Contract

Designers, Inc. v. International

Cliffside, Inc., supra, 458 F. Supp. at

735. Moreover, even as to those

defendants for whom plaintiff's complaint

alleges business contacts with the

District, discovery cannot be authorized.

As noted, these defendants, the Natural

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Resources Company and Michigan Wisconsin

Pipeline Company, have, by way of

affidavit, indicated that any contacts

with the District were restricted to

participation in governmental operations.

Plaintiff has not challenged these

contentions with specific facts in

affidavits, nor has it explained in an

affidavit why it needs to conduct

discovery in order to justify its

opposition to defendant's motion, as

required by the Federal Rules of Civil

Procedure. See Fed. R. Civ. P. 56(e),

(f).

Finally, even if there were

some legitimacy to plaintiff's contention

that it needs discovery to demonstrate

personal jurisdiction, it appears that

plaintiff has already been given "an

adequate opportunity to obtain informa-

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tion through discovery." Vespe Contracting

Company v. Anvan Corp., 433 F. Supp.

1226, 1233 n.9 (E.D. Pa. 1977); Berlin

Democratic Club v. Rumsfeld, 410 F. Supp.

144, 151 (D.D.C. 1976). Plaintiff filed

its original complaint on July 6, 1981.

The first of the private defendants

received service in early July, 1981.

Plaintiff sought no discovery at that

time, either in the form of interroga-

tories or requests for production of

documents. Nor did the plaintiff seek

to depose any of the private defendants

in July or August pursuant to Federal

Rule of Civil Procedure 30(a). Further,

the record reflects that the private

defendants notified Naartex at least by

September 4, 1981, that they were

planning to file dispositive motions

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based, at least in part, on a lack of in

personam jurisdiction. Despite the fact

that plaintiff suggested the schedule for

briefing of defendants’ motions that was

approved by the court on October 23,

1981, plaintiff made no attempt to

initiate any discovery prior to the

filing of the private defendants' motions

to dismiss on November 23, 1981. on

Naartex' motion, the court extended the

time in which plaintiff could respond to

the motion to dismiss until January lL5,

1982; at this stage, plaintiff still made

no effort to initiate discovery and did

not suggest that it needed to conduct

discovery in order to oppose defendants'

motions. The court denied plaintiff's

motion for an extension of time to

respond to defendants’ motions on

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February 25, 1982. Thus, the record

indicates that for close to six months

the plaintiff refrained from pursing the

discovery it now contends is so essential

to effective opposition to defendants'

motions; for approximately four of these

months, plaintiff was on specific notice

that defendants intended to raise the

defense of lack of personal jurisdiction.

Accordingly, plaintiff cannot genuinely

contend that it did not have sufficient

opportunity to conduct the "limited

discovery" it now seeks, and the court

is more than justified in dismissing all

the private defendants from this suit.

Venue with respect to the

claims against the private defendants

is purportedly grounded in 28 U.S.C.

$1391(b). 28 U.S.C. §1391l(e), may

provide a basis for venue over the claims

against the Secretary of the Interior

but does not furnish an independent

basis for venue over the private

litigants. See Lamont v. Haig, 590 F.2d

1124 (D.C. Cir. 1978).

Section 1391(b) provides that

a civil action not founded solely on

diversity of citizenship (such as this

one) may be brought only in the judicial

district where all defendants reside "or

in the judicial district where the claim

arose." Obviously, all the defendants do

not reside in this district. Thus,

venue is only proper here if the "claim

arose" in this jurisdiction, as

plaintiff's complaint concedes. See

Amended Complaint at 12.

The proper interpretation of

the language "in which the claim arose"

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is somewhat unclear. The most recent

discussion of the provision in this

Circuit is that found in Lamont v. Haig,

590 F.2d 1124 (D.C. Cir. 1978). In that

case, the court adopted a rather pliable,

practically-oriented interpretation of

the pertinent language. The court

endorsed the view that section 1391(b)

confers venue in a district where a

"substantial portion of the acts, or

omissions giving rise to the actions

occurred, notwithstanding that venue

might also lie in other districts. Id.,

at 1134. The court stressed that venue

considerations should be attuned as much

as possible, to achieving the most

efficient strategy for conduct of the

lawsuit; the district court must engage

in a “commonsense appraisal" of the

implications of pertinent events for

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accessibility to witnesses and records.

Id., at 1134; see also Florida Nursing

Home Association v. Page, 616 F.2d 1355,

1361 (5th Cir. 1980).

Subsequent to Lamont, the

Supreme Court has apparently adopted a

more restrictive view of the scope of

section 1391(b). In Leroy v. Great

Western United Corp., _U.S.__, 00 S.

Ct. 2710 (1979), the Court declined to

hold that there can only be one district

where a claim "arose," but indicated

that only in quite unusual situations

will there be more than one district

which can be considered the locus of the

claim. Id., at 2718. In the rare circum-

stances where there are two districts of

"approximately equal plausibility - in

terms of the availability of witnesses, the

accessibility of other relevant evidence

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and the convenience of the defendant,"

the plaintiff may choose either district.

Thus, while Leroy is a rather

Opaque opinion, it does appear to

authorize quite a different approach

than that enunciated in Lamont. Instead

of allowing the plaintiff to select any

district in which relevant actions "were

not insubstantial,” Lamont v. Haig,

supra, at 1134 n. 62, Leroy provides

that venue is proper only in the district

where the most substantial actions

occurred; only if this determination is

unclear can a plaintiff choose between

forums. Fortunately, this court is not

required to resolve the discrepancies

between Lamont and Leroy in order to

conclude that venue does not properly

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reside in this jurisdiction with respect

to the private defendants. Virtually

all of the relevant events that underlie

plaintiff's complaint occurred in Wyoming,

including the filing of offers for the

lease, the drawing of offers for the

lease, the issuance of the lease and the

approval of subsequent assignments by

the Wyoming State Office of the BLM.

Moreover, every agency action except one

emanated from organs of the Department

of interior Located outside of the

District. The only pertinent decision

occurring in Washington was the decision

of the Secretary declining to assume

jurisdiction over plaintifé's

administrative protest. See Complaint

at 755-56. Finally, while resolution of

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this case may be restricted to the

administrative record, if the court

looks beyond the administrative record

for any reason, witnesses and evidence

will almost certainly be located outside

the District, most probably in Wyoming.

Clearly then, the most sub-

stantial actions material to this case

took place in Wyoming. It is difficult

to conceive of Washington as a district

of “approximately equal plausibility,”

in Leroy's terms. Even applying the

less rigorous standard propounded in

Lamont, Washington is a district where

relevant actions were "insubstantial"

according to any reasonable analysis.

As a result, application of either of

the arguably relevant standards for

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ascertaining where a claim "arose"

reveals that venue does not exist in the

District with regard to the private

defendants.

Because personal jurisdiction

and venue are lacking in the District,

the private defendants argue that this

action should be dismissed in its

entirety for failure to join indis-

pensable parties. This contention has

substantial merit. The private

defendants are certainly "persons to be

joined if feasible” under Rule 19(a) of

the Federal Rules of Civil Procedure.

Since all of the private defendants have

in the past held or presently own an

interest in lease W-50394, they are

persons who "claim an interest relating

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to the subject of the action" which may,

as a practical matter, be impeded or

impaired if suit proceeds in their

absence. See McKenna v. Udall, 418 F.2d

1171 (D.C. Cir. 1969).

Because the private defendants

are parties that should be joined, the

court must consider whether the

infeasibility of joining them requires

dismissal of the action. Rule 19(b)

sets out the relevant factors in such a

determination as: (1) to what extent a

judgment rendered in the person's absence

might be prejudicial to him or those

already parties; (2) the extent to which,

by the shaping of relief, the prejudice

can be lessened or avoided; (3) whether

a judgment rendered in the person's

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absence will be adequate; and (4) whether

the plaintiff will have an adequate remedy

if the action is dismissed for nonjoinder.

As the preceding discussion suggests,

continuation of this suit in the absence

of some or all of the private defendants

would be likely to be significantly

prejudicial to their interests. The

suit seeks cancellation of the lease and

the disgorgement of all allegedly

fraudulently obtained profits. Such

relief, if awarded by the court, would

adversely impact upon the private

defendants contesting personal

jurisdiction and venue in the District.

Plaintiff's principal response

to this line of reasoning is that, in

accordance with the second factor

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enumerated in Rule 19(b), the court

could shape relief in such a way that the

interests of particular defendants will

not be materially damaged; specifically,

Naartex suggests, the court could tailor

its order so that only those interests

of defendants still in the suit will be

cancelled and only these defendants will

be deprived of their fraudulently

obtained profits. This response does

not assest plaintiff, however, because

it is clear that such piecemeal relief

would not allow the court to render an

"adequate" judgment, the third factor

delineated in Rule 19(b). Since it is

likely that most, if not all, of the

private defendants must be dismissed

from this suit on the basis of lack of

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venue or personal jurisdiction, any final

judgment directed solely at a private

defendants remaining in the suit or the

government will simply not be meaningful.

The fact that the majority (at least) of

private parties holding an interest in

the lease could not have their rights

adjudicated would deprive any final

judgment issued by this court of real

significance.

The final factor mentioned in

Rule 19(b) is whether plaintiff would

have an adequate remedy if the action is

dismissed. It is evident that such a

remedy exists in this case. Suit could

easily proceed in federal court in

Wyoming. The private defendants have

conceded that venue and personal

jurisdiction are proper in that jurisdic-

tion. In fact, as the previous dis-

cussion reveals, Wyoming would un-

questionably be a superior forum for

prosecution of this suit. A trial in

Wyoming would be far more convenient for

parties and witnesses. Wyoming federal

courts have litigated a substantial

number of suits virtually identical to

the present one and are intimately

familiar with the complex regulatory

procedures and requirements that underlie

plaintiff's claims. Thus, the court

concludes that various private parties

for whom joinder is infeasible are in-

dispensable to the further conduct of

this action. Suit cannot proceed “among

the parties" remaining after these

J

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private defendants are dismissed from

the suit. Fed. R. Civ. P. 19(b).

B. Private Right of Action

Under Mineral Leasing Act

Plaintiff concedes that its

action against the private defendants

assumes the existence of an implied

private right of action in the Mineral

Leasing Act of 1920. See Reply in

Support of Joint Motion for Russell Huff

to Intervene or Be Joined as a Party

Plaintiff at 2 (defendants "will not be

required under the Act to disgorge these

illegal proceeds unless the court

recognizes a private right of action

under the Act and énters a judgment

based on common law fraud"). An analysis

of the Mineral Leasing Act and its under-

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lying purposes, however, reveals that

Congress did not intend to create a

private right of action to police against

transgressions of the Act by private

parties.

The Mineral Leasing Act does

not expressly vest in any person besides

the Attorney General the right to bring

suit to enforce the Act's provisions. A

number of recent Supreme Court cases have

clarified that the essential question to

be answered in determining whether a

private remedy is implicit in a statute

is whether "Congress intended to create

the remedy asserted." Transamerica

Mortgage Advisors, Inc. v. Lewis, 444

U.S. 11, 15 (1979) (Emphasis added); see

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California v. Sierra Club, U.S._, 101

__S. Ct. 1775, 1779 (1981) (the “ultimate

issue is whether Congress intended to

create a private right of action”):

Universities Research Ass'n. v. Coutu, _

Touche Ross & Co. v. Reddington, 442 U.S.

566, 568 (1979); Cannon v. University of

Chicago, 441 U.S. 677, 688 (1979). The

Court has shifted away from the focus in

earlier cases, see e.g., J.1. Case v.

Borak, 377 U.S. 426 (1964), upon the

desirability of implying the private

right of action in order to effectuate

the purposes of a given statute.

California v. Sierra Club, _U.S._, 101

S. Ct. at 1781 (the courts "will not

engraft a remedy on a statute, no matter

how salutary, that Congress did not

intend to provide"); Transamerica Mortgage

Advisors, Inc. v. Lewis, supra, 444 U.S.

at 15.

In determining whether

Congress intended to create a private

right of action, it is appropriate to

first scrutinize the language of the

statute itself. See Touche Ross & Co.,

supra, 442 U.S. at 568; Santa Fe

Industries, Inc. v. Green, 430 U.S. l

(1976). There is nothing on the face of

the Mineral Leasing Act which suggests

that private parties should be permitted

to enforce the Act's directives. In

fact, an altogether contrary conclusion

must be drawn from the language of the

statute. Section 27 of the Act provides

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that if any interest in a lease is owned

or controlled "in violation of any of the

provisions of this chapter” the lease may

be cancelled "in any appropriate proceed-

ing instituted by the Attorney General."

30 U.S.C. $184(h)(1). Furthermore, the

Act is replete with references to over-

sight responsibilities and administrative

obligations vested solely in the Attorney

General or the Secretary of the Interior.

See generally 30 U.S.C. §188(b) (providing

for administrative cancellation of lease

by the Secretary); 30 U.S.C. §226(j)

(authorizing Secretary to approve develop-

ment contracts with leasees). It is an

elementary principle of statutory con-

struction that where a statute “Limits a

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thing to be done in a particular mode,

it includes the negative of any other

mode." Botany Mills v. United States,

278 U.S. 282 (1929). When applied to

the question of legislative intent to

create a private right of action, this

general axiom suggests that a "statute

expressly provides a particular remedy

or remedies, a court must be chary of

reading others into it." Transamerica,

supra, 444 U.S. at 19. Therefore, the

language of the Mineral Leasing Act

indicates Congressional intent not to

provide for private rights of action.

The legislative history of the

statute is siatlacty unsupportive of any

contention that Congress desired that

A - 109

private suits for damages supplement

cancellation actions by the Attorney

General. Naartex offers not one shred

of legislative history implying intent

on the part of Congress to create a

private right of action. Rather,

plaintiff merely explains how a private

remedy might be consistent with the

underlying policies of the Mineral

Leasing Act. While an independent

appraisal of the value of a private

cause of action tay at one time have

been sufficient to create such an action,

see, J.I1. Case v. Borak, 377 U.S. 426

(1965), the Supreme Court has recently

stressed that, in the absence of any

indicia of Congressional intent courts

are precluded from engaging in an

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automonous assessment of the desirability

of private enforcement. See California

v. Sierra, supra, U.S. at _, 101 S. Ct.

at 1779. Since plaintiff can point to

neither statutory language nor legislative

history hinting at an intention to intro-

duce private causes of action in the

Mineral Leasing Act, the court can only

conclude that no such action exists.

C. The Anti-Assignment Laws

The proceding discussion reveals

that there are fatal defects in plaintiff's

attempt to sue the private defendants,

at least in this jurisdiction. Such

defects are also present with regard to

plaintiff's effort’ to secure relief from

the Secretary of the Interior. Most

notably, Naartex' suit against the govern-

ment appears to be a classic violation

A - lll

of the federal anti-assignment laws. 31

U.S.C. §203 provides that:

All transfers and assignments

made of any claim upon the

United States ...shall be

absolutely null and void,

unless they are freely made

and executed in the presence

of at least two attesting

witnesses, after the allowance

of such claim...

Similarly, 41 U.S.C. $15 states that:

No contract or order, or any

interest therein, shall be

transferred by the party to

whom such contract or order

is given to any other party,

and any such transfer shall

cause the annulment of the

contract or order transferred,

so far as the United States

are concerned.

It is undisputed that the government

never authorized the transfer of Huff's

"interest" in Lease 50394 to Naartex.1/

Thus, it would appear that the anti-

assignment provisions apply to the

instant suit. The contract between Huff

and Naartex assigns to Naartex the right

to assert any claims Huff may have to

the parcel in question, in exchange for a

1/ In fact, Naartex has never filed an

application for approval of a transfer

of any interest in the offer and

lease, as it was required to do by

43 C.F.R. §§3106.3-4. Furthermore,

even if Naartex had filed such an

application, the BLM could not have

approved the transfer because Naartex

never complied with controlling

regulations by filing a statement of

its qualifications to hold a lease,

43 C.F.R. $3106.1-2, or the required

interest statement. 43 C.F.R.

$3106.1-4. See Geosearch, Inc. v.

Andrus, 508 F. Supp. ; D.

Wyo. 1981). ,

This, of course, indicates that

regardless of the applicability of

the anti-assignment laws to the

transfer in question, Naartex has no

standing to prosecute this suit

because it has no valid interest in

the lease or the offer. Id.

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percentage of the gross recovery. More-

over, to the extent Naartex claims it

has any entitlement to Lease 50395, or

to secure cancellation of the lease, it

is, in essence, contending that it

derived a contractual right against the

government from Huff. See Standard Oil

Co. of California v. Hickel, 317 F.

Supp. 1192, 1197 (D. Alaska 1970), aff'd,

450 F.2d 493 (9th Cir. 1971). Finally,

as the government points out, the plain

language of the anti-assignment laws

comprehends claims to public property,

such as an oil and gas lease, as well as

claims to money. See generally United

States v. Gillis, 95 U.S. 407, 413 (1877).

Plaintiff's response to the

government's anti-assignment argument is

twofold. First, plaintiff contends that

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the Huff-Naartex agreement implicates

none of the evils which the anti-

assignment provisions are directed at.

This response is without significance.

As noted above, the agreement falls

plainly within the wording of the anti-

assignment laws. This court cannot

ignore a clear statutory directive

because it feels that the problems

Congress had in mind will not result

from a particular contractual relation-

ship. In addition, the agreement does

engender the precise evils that motivated

the anti-assignment provisions. One

obvious purpose of these provisions is

to prevent persons ‘with the means and

disposition from buying up claims against

the government and thereby proliferating

suits against the government. See,

A - 115

e.g., United States v. Shannon, 342 U.S.

388 (1952); Scanwell Laboratories, Inc.

v. Thomas, 521 F.2d 941, 944-45 n.3

(D.C. Cir. 1975), cert. denied, 425 U.S.

910 (1975). The agreement between Huff

and Naartex is a perfect example of a

professional entity buying up interests

of unsuccessful individual bidders less

able to prosecute a suit against the

government. The fact that such an agree-

ment will result in proliferation of

suits against the government can be no

more evident than in the circumstances

of this case. As noted, Naartex and Mr.

Huff have moved to join Mr. Huff as a

party plaintiff. This obviously suggests

that Mr. Huff has an independent right

to proceed against the government, despite

the transfer of his interest to Naartex.

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A more blatant example of suit prolifera-

tion is hard to imagine.

Naartex' second argument is

that even if the agreement between Huff

and Naartex violates the anti-assignment

laws, the proper judicial remedy is not

to dismiss the suit but to join Huff as

the proper party plaintiff. Essentially,

Naartex is contending that Huff should

now be permitted to replace Naartex as

the actual plaintiff at this stage of

the proceedings. Naartex' and Huff's

effort to salvage this suit cannot be

permitted. First, it is the general

rule that "intervention will not be

permitted to breathe life into a ‘non-

existent' lawsuit." McClune v. Shamah,

593 F.2d 482 (3rd Cir. 1979). A motion

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for intervention under Rule 24 is not

ordinarily a proper device "to cure a

situation in which plaintiffs may have

stated causes of action that they have

no standing to litigate." Id.; Interstate

Commerce Commission v. Southern Railway

Co., 380 F.2d 534 (5th Cir. 1976)

(authority to bring a suit cannot be

"bestowed by intervenors on an original

plaintiff"). The attempt to add Huff as

a party plaintiff represents an obvious

effort to revitalize a suit which Naartex

would otherwise have no basis for

litigating due to the operation of the

anti-assignment laws.

Second, the court's discretion-

ary authority to allow an intervenor to

take control of a case should only be

exercised when “the intervenor has a

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separate and independent basis for

jurisdiction.” Fuller v. Volk, 351 F.2d

323, 329 (3rd Cir. 1965). Huff lacks

such an independent basis for jurisdic-

tion because he did not appeal from the

rejection of his offer to lease. Under

DOI regulations, one adversely affected

by a decision of the BLM can appeal to

the IBLA, but such an appeal "is required

to be filed within thirty days after the

person taking the appeal is served with

the decision from which he is appealing.”

43 C.F.R. $4.411 (1979). Huff received

notice that his offer had been rejected

when his offer was returned in June,

1975. Thereafter, he never appealed the

decision denying his bid, instead trans-

ferring his interests to Naartex. The

IBLA has held that the requirement

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for an appeal within 30 days is “mandatory

and jurisdictional.” lLlean Landis, 49

IBLA 59 (1980). Thus, even if Naartex

could offer some reason why its protest

and petition for reconsideration should

allow it to file suit at this time, Huff

has no conceivable explanation for ignor-

ing the 30-day appeal limit. Similarly,

an independent action by Huff appears to

be clearly barred by the applicable

statute of limitations. Section 226-2

of the Mineral Leasing Act provides that

"([njo action contesting a decision of

the Secretary involving any oil and gas

lease shall be maintained unless such

action is commenced or taken within

ninety days after the final decision of

the Secretary relating to such matter."

30 U.S.C. $226-2 (1976). Again, Naartex

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may have some plausible claim that the

ninety-day statute of limitations did

not begin to run until the Secretary of

the Interior made the final decision not

to intercede on Naartex' behalf but Huff

has no rational basis for contending

that the ninety-day statute of limitations

with respect to his interest did not

expire long ago. Thus, Huff lacks an

independent basis for jurisdiction that

would make him eligible to take command

of this lawsuit. As a result, the

potential intervention of Huff as a

party plaintiff does not cure the basic

flaws in Naartex' claim against the

government.

D. Standing

As a final threshold matter,

the court believes that neither Naartex

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nor Huff has standing to prosecute this

action. As noted, Naartex never filed

an application for approval of a transfer

of any interest in the offer and lease,

as it was required to by 43 C.F.R.

§$§3106.3-4. Thus, Naartex does not even

have a colorable claim to the lease or

offer in question. See Geosearch, Inc.

v. Andrus, 508 F. Supp. 839, 847 (D.

Wyo. 1981). With respect to Huff, it is

uncontroverted that he did not file an

appeal from the issuance of the lease

within thirty days, as is required by 43

C.F.R. $4.411, and, in fact, never

administratively challenged the rejection

of his offer. Accordingly, any interest

Huff may have had in the lease that

could have been sufficient to give him

standing has been extinguished.

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Moreover, it appears that

Naartex and Huff have not demonstrated

any injury that could be redressed by a

favorable decision of the court. Duke

Power Co. v. Carolina Env. Study Group,

Inc., 438 U.S. 59 (1978); Citizens

Concerned for Separation of Church and

State v. City and County of Denver, 628

F.2d 1289 (lOth Cir. 1980). The main

relief sought by Naartex is cancellation

of the lease and disgorgement of the

funds fraudulently earned. It is doubt-

ful that this court can order cancella-

tion of the lease in question. Lease

W-50394 cannot be cancelled administra-

tively because it is a currently-producing

oil and gas lease. See 30 U.S.C.

$188(b). Further, the Mineral Leasing

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Act expressly vests in the Attorney

General complete discretion to initiate

cancellation proceedings in federal

court. 30 U.S.C. $184(h)(1).

In addition, even if the court

could order cancellation of the lease in

question, this could not tangibly benefit

Naartex or Huff. Since Huff was not the

second or third bidder chosen, but was

in the general class of unsuccessful

bidders, the lease cannot be reissued to

Huff or Naartex. 43 C.F.R. $3112.1.

The only possible consequences of lease

cancellation are that the lease would be

withdrawn, offered at a competitive bid

or made available for a new simultaneous

draw. 43 C.F.R. §3112.1. See Geosearch,

Inc. v. Andrus, supra, 508 F. Supp. at

845. None of these exigencies would

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extend any concrete benefit to plaintiff

or increase in any measurable way the

likelihood that the lease would ultimately

be granted to Naartex or Huff. It is

evident, then, that the present and

prospective plaintiffs, unable to explain

how any actual injury they have suffered

can be remedied by this court, lack

standing to prosecute this action. See

Pullman v. Chorney, 509 F. Supp. 162 (D.

Colo. 1981).

IIL. Joint Motion to Join Huff as a Party

Plaintiff and Amend the Complaint

The sole purpose of plaintiff's

effort to bring Huff into this lawsuit

is to avoid dismissal on the grounds of

violation of the anti-assigninent provisions.

As discussed above, see pp. 15-16, infra,

Huff's application to intervene in this

suit and thereby take over its prosecution

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is defective on a number of grounds.

For comparable reasons, Naartex' motion

to amend its complaint to include Huff

as a party plaintiff also lacks merit.

Rule 15(a) of the Federal Rules of Civil

Procedure requires that leave to amend

"shall be given freely when justice so

requires." The Supreme Court has

indicated that two factors relevant to

the determination of whether leave to

amend should be granted are whether

there has been "undue delay, bad faith,

or dilatory motive" on the part of the

movant and whether the amendment would

be "futile." Foman v. Davis, 371 U.S.

178, 182 (1962). Both of these factors

counsel strongly in favor of denying the

motion to amend. Huff has, presumably,

been aware of this action since its

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inception and Naartex has obviously been

familiar with Huff's interest in the

suit. Despite this fact, Huff made no

effort to intervene and Naartex made no

effort to amend its complaint to include

Huff until defendants had prepared exten-

sive dispositive motions.2/ There is

no explanation for this delay beyond that

which is apparent on the record; plaintiff

seeks to add Huff to this suit only in

order to remove a basic threshold

deficiency in Naartex" own suit.

2/ This reasoning, of course, also

indicates that Huff's motion to

intervene was not "timely" made, a

prerequisite to intervention under

Rule 24(a) of the Federal Rules of

Civil Procedure. If Huff felt that

he had a significant interest to

protect in this suit, he presumably

would not have waited until the last

Cay Naartex was given to respond to

the defendants' dispositive motions.

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Independently, there are valid

grounds for denying the motion to amend

because the amendment would be utterly

futile. Even if Huff's addition to the

suit could resolve the anti-deficiency

objection of the government, it would do

nothing to cure the other problems

associated with this lawsuit.

Specifically, adding Huff to the suit

would not cure the lack of personal

jurisdiction or venue over the private

defendants or the absence of a private

cause of action under the Mineral Leasing

Act. The suit would still be subject to

dismissal, regardless of Huff's participa-

tion.

IV. Conclusion

This suit suffers from a number

of flaws with respect to both the claims

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against the private defendants and the

claims directed against the government.

The court must grant defendants' motions

to dismiss and deny the joint motion to

intervene and amend the complaint.

An appropriate Order accompanies

this Memorandum Opinion.

/s/ Thomas A. Flanner

UNITED STATES DISTRICT JUDGE

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

NAARTEX CONSULTING CORP.,

Plaintiff,

Civil Action

No. 81-1540

Ve

JAMES E. WATT, Secretary

of Interior, et al. Filed June 2,

1982

James F. Davey,

Clerk

Defendants.

ee ae ee ee a a a a a a a

ORDER

This matter comes before the

court on numerous motions. Upon consid-

eration of the parties' arguments and

submissions, and for the reasons expressed

in the accompanying memorandum opinion,

it is by the court, this 21 day of June,

1982,

ORDERED that the motions of

defendants American Natural Resources

Company, Michigan Wisconsin Pipe Line

A - 130

Company, Southland Royalty Company, the

General American Oil Company of Texas,

J.S. Harrell, Davis Oil Company, Reading

and Bates Petroleum Company, Gordon L.

Heele, James G. Watt, Raymond G. Albrecht,

Paul Messinger & Co., Marlis E. Smith,

trustee, and Panhandle Western Gas

Company to dismiss Plaintiff's amended

complaint shall be and hereby are,

granted; and it is further

ORDERED that the motion of Fred

L. Engle, d/b/a Resource Service Company,

for judgment on the pleadings shall be,

and hereby is, granted; and it is further

ORDERED that the joint astien

for Russell Huff ee intervene as a party

plaintiff and to file an amended complaint

adding Russell Huff as a party plaintiff

A - 131

shall be, and hereby is, denied; and it

is further

ORDERED that this action is

dismissed.

/s/ Thomas A. Flannery

UNITED STATES DISTRICT JUDGE

UNITED STATES DEPARTMENT OF THE INTERIOR

OFFICE OF HEARINGS AND APPEALS

INTERIOR BOARD OF LAND APPEALS

4015 Wilson Boulevard

Arlington, Virginia 22203

NAARTEX CONSULTING CORP.

IBLA 80-65 Decided June 9, 1980

Appeal from a decision of the

Wyoming State Office, Bureau of Land

Management, dismissing protest of the

issuance of oil and gas lease W-50394.

Appeal dismissed.

l. Oil and Gas Leases:

Generally--Oil and Gas

Leases: Cancellation

Under 30 U.S.C. $188(b)

(1976), an oil and gas

lease issued after August

21, 1935, under the

provisions of 30 U.S.C.

$226 (1976), is subject to

cancellation by the

Secretary for lease

violation unless or until

the land covered by any

such lease is known to

contain valuable deposits

of oil or gas. A lease

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known to contain such

deposits is subject to

cancellation in accordance

with 30 U.S.C. §184(h) (1)

(1976), which requires a

proceeding in Federal

district court instituted

by the Attorney General.

Oil and Gas Leases:

Cancellation

By the terms of 30 U.S.C.

§$184(h)(2) (1976), the

Department is prevented

from cancelling a lease

held by a qualified bona

fide purchaser, even though

the interest of its assignor

or other predecessor in

title (including the original

lessee of the United States)

may have been subject to

cancellation for a violation

of the Mineral Leasing

Act. In the absence of

any evidence that the facts

surrounding certain mesne

assignments were sufficient

to put an ordinary prudent

person on inquiry, an

inquiry which, if followed

with reasonable diligence,

would lead to the discovery

of defects in the title to

the lease or equitable

rights of any other persons

A - 1%4

APPEARANCES :

affecting the property, the

Department is prevented

from cancelling a lease

based upon violations by a

lease holder's predecessor-

in-interest.

Oil and Gas Leases:

Cancellation--Rules of

Practice: Protest

Where a protestant

challenges the bona fides

of an oil and gas lease-

holder, the burden is upon

appellant, not the BLM, to

establish by facts the

substance of its charge.

Oil and Gas Leases:

Cancellation

If a lease is cancelled or

forfeited to the Government

pursuant to 30 U.S.C.

§184(h) (1976), such lease

shall be sold by the

Secretary to the highest

responsible bidder by

competitive bidding.

Melvin E. Leslie, Esq.,

Salt Lake City, Utah, for appellant;

Randall M. Case, Esq., Denver, Colorado,

for General American Oil Co. of Texas;

Douglas B. Glass, Esq., Houston, Texas,

for Michigan Wisconsin Pipe Line Co.

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OPINION BY ADMINISTRATIVE JUDGE HENRIQUES

The simultaneous drawing entry

card (DEC) of Norbert F. Albrecht was

drawn with first priority for Parcel No.

484 offered by the Wyoming State Office,

Bureau of Land Management (BLM), in its

March 1975 list of lands available for

oil and gas leasing. The DEC was assigned

Serial No. W 50394 and matured into oil

and gas lease W 50394 issued effective

June 1, 1975, for the SW 1/4 sec. 2; SE

1/4 sec. 4; lots l, 2, S$ 1/2 NE .1/4, SE

1/4 sec. 5; N 1/2 S 1/2 sec. 11, T. 44

N., R. 75 W., sixth principal meridian,

Campbell County, Wyoming, containing

779.19 acres. Record title to the lease

was assigned, effective July 1, 1975, to

J.S. Harrell, with Albrecht retaining a

5 percent overriding royalty interest.

Subsequently, record title to the lease

became vested in Michigan Wisconsin Pipe

Line Co. and General American Oil Co. of

Texas, each owning an undivided 50

percent interest. Thereafter, operation

rights in a portion of the lease were

vested in Davis Oil Co., Southland Royalty

Co., and Reading & Bates Oil and Gas Co,

As the result of drilling activity under

Communitization Agreement NRM 1180 in SW

1/4 sec. 11, T. 44 N., R. 75 W., production

of oil was achieved and lease W-50394

converted to producing status, subject to

minimum royalty payment in lieu of annual

rental. As a result of other completed

wells, all land in lease W 50394 has

been determined to be on the known geologic

structure (KGS) of Hartzog Draw Field,

with the definitions being issued from June

15, 1977, to February 9, 1978.

On January 25, 1979, Geosearch,

Inc., by Alvin Abrams, President, filed

a protest against issuance of lease W-

50394 to Norbert Albrecht. Geosearch

was allegedly acting on behalf of K.J.

Feil, a member of an amorphous class of

persons who had filed DEC's for the said

Parcel No. 484, but were unsuccessful in

the drawing. The protest charged the

Albrecht had not been qualified to

receive lease W 50394 because his DEC

had been filed by Fred L. Engle, d.b.a.

Resource Service Co., under a service

agreement violative of the Department's

regulations, 43 CFR 3102.7 and 3112.5-2.

The protest requested the cancellation

of any interests in lease W 50394 found

to be in the hands of persons who were

not bona fide purchasers thereof, and

reissuance of those lease interests to

Geosearch, Inc., and the class of persons

represented by the protest.

The BLM State Office dismissed

the protest by decision of February 6,

1979, stating:

Regulation 43 CFR 3112.2-1

(a) states, "Unsuccessful

drawees will be notified by

the return of their respective

entry cards." At the time

this parcel was won by Mr.

Albrecht, in 1975, the #2 and

#3 cards were returned to the

unsuccessful applicants, in

accordance with the above

cited regulation. Since none

of the unsuccessful applicants

appealed the return of their

cards within 30 days after

they were received, we issued

the lease to the #1 drawee,

Mr. Albrecht, effective June

1, 1975.

Mr. Albrecht has assigned

100% of his interest in this

lease to Mr. J.S. Harrell,

A - 139

effective July 1, 1975. There

have been two other record

title assignments approved

since that time and the lease

is now in the names of Michigan-

Wisconsin Pipe Line Company

and General American Oil Company

of Texas, an undivided 50%

each. Regulation 43 CFR

3102.1-2(a) sets out the

provisions of the statutes to

protect bona fide purchasers.

On July 19, 1977, a well

was completed on the SW 1/4

Sec. ll in this lease and the

lease is now in a producing

Status. Regulation 43 CFR

3108.3 states, “Leases known

to contain valuable deposits

of oil or gas may be cancelled

only by judicial proceedings

n the manner provided in

sections 27 and 31 of the act."

(Emphasis added).

This office does not have

the authority to determine the

status of purchasers. "The

burden is on the protestant to

show justification for the

disqualification of the

successful drawee in a

simultaneous filing." 39 IBLA

49, Geosearch, Inc., January

16, 1979.

A - 140

The subsequent appeal by Geosearch to

this Board, docketed under IBLA 79-270,

was summarily dismissed on May 6, 1979,

for failure to file a statement of

reasons in support of the appeal.

43 CFR 4.402.

Thereafter on September 19,

1979, Naartex Consulting Corp., by Alvin

Abrams, President, filed an identical

protest against the issuance of lease W-

50394, allegedly acting on behalf of

Russell H. Huff, a member of the amorphous

class of persons who had filed DEC's

unsuccessfully for the said Parcel No.

484 in March 1975.

By decision of September 28,

1979, the BLM State Office dismissed

this protest, stating as follows:

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As was recited to you in

our letter of February 6,

1979: Regulation 43 CFR

3112.2-l(a)(4) states,

"unsuccessful drawees will be

notified by the return of

their respective entry cards."

At the time this parcel was

won by Mr. Albrecht, in 1975,

all other unsuccessful drawees'

cards were ret

This text is long and has been trimmed here. Open the source document for the complete record.