Petitioners Brief — Tidewater Oil Co. v. Jackson

No. 486 7

'IN THE .

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1963.

” TIDEWATER OIL COMPANY .:

Petitioner.

VS.

GEORGE E. JACKSON and’KARL B. JACKSON, Doing

. Business in Partnership As JACKSON BROTHERS,

Respondents. ‘ ;

PETITIONER'S REPLY pas ae

JAMES P. Hart,

904 Brown Building. |

Austin 1. Texas.

CLiypeE E. WILLBERN.

P. O. Box 1404.,-:

Adee Soy Houston I, Texas,

\ ' Cari C. CHASE, |

; . Eureka. Kansis, °

‘ A. W. HERSHBERGER,

RICHARD JONES,

WILLIAM P. THOMPSON,

H. E. JONEs,

1022 ane Center Building,

. Wichita 2, Kansas,

Attorneys for Petitioner.

E. L Menvenbait Inc., 1108 Oak Street, Kansas City, Mo: 64108, HArrison 1-36

. Argurnent—_

Sisal’ “Statement of the Case" Baar

The Kansas Commission’ s finding" that ‘there had

been no injury to respondents’ correlative rights

The defense of estoppel by judgment is fully sup-

‘ported by Kansas. law; and the decision of the

Court of Appeals is in — with applicable

state Taw a

-Since the decision bv the eniiien Commission

and the Kansas courts was not only that Tide-

water’s operations were lawful but also that they

did not cause injurv to respondents’ correlative

rights, this previous decision‘ precludes any re-

coverv. bv respondents on_any theorv of liability

The fact that the Kansas Cémmission could not

give a judgment for damages doés not mean that

its decision that Jackson Brothers had not suf-

fered any injurv to their correlative rights would

not be binding upon Jackson 1 Brothers in a. later

damage suit . :

©

‘Conclusion

‘Citations

‘CASES: ‘

cin Vv. Railw 12) y Company. 109 Kan. 234, 198 Pac.

942 (1921)

60 £1907)"

Chanute Brick & Tile Company v, The Gas Belt Fuel

Company, 89 Kan, 177. 130 Pac. 649 (1913)

18

2)

«20

City of Chertyvale v. Studyvin, 76 Kan’ 285, 9] eng i

0

Se i INDEX

Gas Service Company v. Consolidated Gas Utilities

‘Corporation, 145 Kan. 423. 65 P.2d 584 (1937

Hauck v. Pipe Line-Co., Ltd., 153 Pa. St. 366, 375°

_ Helms v. Eastern Ig ansas Oil. Company, 102 Kan. 164,

169, Pac. 208 (1917) :

Tt Hofstetter v. Myers Construction, Jnc., 170 Kan. 464.

227 P.2d 115 (1951) Bae

rae v. State Corporation Commission, 186 Kan.

j. 348 P.2d 613 (1960) -

Pardee MonsantéC hemical C ompany, 187 Kan. 158,

354 P.2d 326 (1960)

Rost v. Union Pacific Railroad Company. 95 Kan. 713.

149 Pac: 679 (1915)

State ex rel. Boynton v. Piblic Sereiee Commission,

135 Kan. 491, 11 P.2d 999 (1932)

Texts: | :

Kuntz, ‘tale of Oil and Gas.” (1962). Section 4.3.

page 95 : :

- Summers, “Oil and Gas,” REE Edition, 1938),

Section 63,4pages 179-13)

14

19 .

wo

4

iH

"IN THE

~ SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1963.

TIDEWATER OIL COMPANY.

. Petitioner,

; VS.

a

GEORGE E. JACKSON and “KARL B. JACKSON, Doing

Business in Partnership As JACKSON BROTHERS,

Respondents. ;

PETITIONER'S REPLY BRIEF —

_ To THE HonorasLE SUPREME CourT OF THE UNITED- STATES: -

Petitioner. Tidewater Oil Company, respectfully sub-.

mits this brief ir reply to respondents’ brief opposing

certiorari.

: 1. Respondents’ “Statement ef-the Case.”

\ . .

Respondents’ “Statement of the Case” ( Respondents’

Brief. 1-6)* presents, a lurid picture of wrongdoing by

r= ry ° :

7 *Respondents’ Brief Opposing Certiorar: will be cited herein,

tor brevity, as Respondents’ Brict. Other references wiil be to ;

the Appendix to the Petition for Certiorar (e.g. A24) or to tne

record in the Court-of Appeals (e. g., R10). All emphasis in this

brief i supplied by us :

>

- &

2

: Tidewater. It isa melodramatic embellishment of findings

which. the District Court ade, in an. ‘all- out adoption of

respondents’ contentions, as opposed to ‘the nosition con-

sistently: maintained’ by Tidewater that “the conduct of

secondary recovery operations in the vicinity of plain-

tiffs’ lease has resulted in substantially greater recovery

of oil ‘from the reservoir by plaintiffs and in extensive °

benefits to the plaintiffs through their recovery ‘of oil

which they would not otherwise have recovered.” (Rae)

The Court of Appeals recognized that the District Court.

in making its findings, credited respondents’ witnesses “as *

against the -contravailing and equally competent testi-

mony of Tidewater.” (A37) Of course if this case simply

invelved a choice between the testimony of one side or

the other in a sharply contested trial, .we would not be

here praving for a writ of certiorari. The point-in this

‘case is that the 1e_respondents-have’ had’ two chances, ‘before

different tribunais. to litigate the same’ issues. Respond-

ents first followed the route prescribed in the .Kansas

statutes, seeking to stop _Tidewater’s secondary recovers

program through | a complaint before the Kansas Corpo-

ration Commission and on appeal! in‘ the Kansas courts.

There they were. completely unsuccessful in their ‘attempts

fo show that Tidewater’s actions were in any way unlawful

or that they caused injury to respondents.. Respondents,

then. resorted to thé Federal Court, which they were able

“to persuade to embrace their contentions, in square con-

flict with the findings and decision of the Kansas Com-

‘mission, which had been reviewed and approved by the

Kansas courts. a es:

/

This conflict is so plain ‘that the Court of Appeals” is

forced to concede that: it exists. Comparing the findings

of the District Court with the findings of the Kansas Com-

mission, the Couit of ‘Appeals savs (A36

.

“These findings are, to, be sure, irreconcilably. in-

consistent. with the conclusive administrative find-.

ings to the effect that. the water flooding operations

were carried on in a lawful manner.

The Court of Appeals ‘also was unwilling to endorse

‘ the Part | of the District Court's judgment penalizing Tide- .

water by assessing punitive | damages. Recognizing that

“no one can deny tle validity of the order permitting

Tidewater to water flood its properties, or that the water.: .

flood operations were. being conducted in accordance’ with *

a valid’ order” (A382), the Court of Appeals ae

epunitive damages— because Tidewater’s $.. acts “were com:

mitted under color, and. in aécordance with\ Kansas law”

and they were “lawfully tindertaken and Tawfuily done,

in’ the interest of conservation.’ (A39) “

The issue is therefore squarely presented in this case: °

Can Tidewater be mulcted in damages for. conducting a Z

conservation program, lawfully: -andertaken and lawfully ~

done pursuant to a valid order of thé Kansas Commission,

on the basis of new and independent findings of the Fed-

‘eral Court which are. “irreconcilably inconsistent” with

the Kansas Commission's findings on the specific complaint

“by respondents against this vtry: same water flood pro-

gram?

2? The Kansas . ‘orimission’s Finding That There

.

Had Been No Injury te — Correla-

tive Rights. ;

The Court of ‘Appeals sousht to avoid the binding et- eae

fect of the Kansas Commissién's decision by interpreting

the -Kansas Commission's Memorandum Opinion to be a

holding that on the issue of correlative Shae “there was.

nathing for the Commission to decide.” (A28)

This pivotal holding of the Court of Appeals is plainly

contraryeto the actual decision of the Corporation Com-

mission, that there had been'no injury to respondents’ cor-

reiative rights. Even the réspondents-do not argue. that

. the Commission. failed to determine that there was no in-

_jury to correlative rights. In substance and effect’. they .

“tonishing ‘position. that “correlative rights”

recognize, as they are forced te do, that the basic reason-

ing of the. Coust of Appeals (that the issue of injurv to

correlative rights was not decided ‘bv the Commission) is

erroneous... Adopting an entirely different theory. respond-

ents argue that “the Commission's determination that there

was no injury. to correlative rights shown was: not | tanta:

mount to a finding that there was n@jamage to Jackson

- Bros.’ property.” Respondents’ Brief 9)

To support the:r contention. respondents | te a ‘the AS

* has nothing to

do with the “property or property rights” of respondents

in their oil and gas properties. - They seek to make a dis--

tinetion ohviously contrary to elementary principles of the

law of oil and gas.

- Since oil and gas in — ground reservoirs are fluids

‘which move in response to differentials in pressure, with:

out regard io property line». and since the operations of

any ‘producer (in either primary or secondary recovery )

unavoidably affect the property of other producers in the

same common reservoir. the courts have long. recognized

_ that unique felationships exist between different .pro-

ducers, with regard to their property rights, which have

usually been ‘covered by the phrase “correlative rights.”

These property rights become particulariv important when,

in. order to prevent waste and to-insure maximum recovery

of oil and gas, a state statute or administrative order regu-

latest broduction. Such regulations usually prov ide that

the authorized methods cf production shall protect the

-

uw

ds

: 1 it

° .

property rights of the various owners in‘the common reser-

“voir in relation to.each other or, in other words, their

“correlative rights.” This was recognized” at an early

time by. a decision of this Court, as is stated in Summers,

“Oil and -Gas” (Permanent Edition, 1938), Section 63,

pages 179-181: : : 7 |

“The courts, particuiarly Chief Justice White in

Ohio Oil Company v. Indiana, [177 U.S. 190] sup-

ported the constitutionality of such statutes on the

ground that there was nd taking of private property

‘but merely a regulation of existing property relations.

‘These existing property, relations, called the correlative

rights of the owners of land in the common source of

- supply. were not.created by the statute, but held to’

exist because of the peculiar physical facts of oil and

gas. The term ‘correlative rights’ is merely a con-

venient method of indicating that each owner of land

in a common ‘source of supply of oil and gas has legal

privileges as. against other owners of land therein to

take oil and ‘gas therefrom by lawful operations con-

ducted on his own land limited, however, by duties té

other owners not to injyre the source. -of supply and

hv duties not jo take an’ undue. propertion of the. ‘oil

and_ gas.”

Cy

In a more recent text. ‘the author, referring to’ the.

* rights of owners of land overly ing a common source of

sunply of oil and gas. savs (Kuntz. “Law of Oil-and Gas.”

-(1962), Section 4.3, -page 95) |

“The term ‘correlatize rights’ is a term used to

refer to all of the rights and duties that exist between

. such. inndowners with: regard to operations in a _com-

mon source of supply.”

In vies , of these standard. authorities Ww hich state, so

far as we know. the’ universally ‘recognized ‘meaning of

“correlative rights.” respondents are unjustified in, aceusing

”

8

)

.

()

petitioner of “a. play on words” or “weasel-worded argu-

ment” (Respondents’ Brie’ 9, 22) in saying that the de-

termination by the Kansas Commission that there was no

injury to respondents’ correlative rights was a decision

that there was no injury- -ta respondents’ property @r -_

erty rights. .

Nor can respondents sustain their endeavor to jilfice

| an artificially restricted meaning upon “correlative rights”

1s defined by the Kansas Commission. The ‘Commission’s

definition of “correlative rights” is as follows (A66):

»

“Correlative Rights shall ‘mean that each owner

or producer in a common source of supply: is privileged

to.produce therefrom only in such manher or amount

“as not to injure the reservair to the detriment of

Others or to take an undue proportion of the oil or gas

obtainable therefrom, or to cause undue’ drainage be-

tween’ developed leases.”

Of. course to “produce” ‘oil ‘and gas from a common _

source of supply involves far more than simply turning a

valve or operating a pump so that the oi] or gas will flow

to the surface.° It includes all of the operations which-have

as their ultimate object the recovery of the oi! and gas.

Specifically, it ‘includes water flooding in secondary re-

covery operations. As the Court of pene itself rec-

ognized ae | |

“Water flooding is a legally and scientifically. ac-

cepted method of producing oil: and gas by the in-

troduction of foreign water into an oil bearing forma-

tion, usually after. primary production methods are no

longer pr otitente."

: OA fair siaibiaaaaiiis of respondents’ complaint in this

case ‘can leave no doubt that they sought recovery on the

ground that the ‘ ‘manner’ "used by Tidewater to “produce”

a

-

oil and gas from its leases caused damage to respondents,

by injuring the.reservoir beneath their lease to their det- ~

_riment by displacing oil and gas with salt ‘water and -

making it more expensive or impossible to recover part of

* the oil and gas, and by causing undue drainage of oil and

gas from respondents’ lease to other parts of the reservoir.

Every one:of the elements of damage which respondents

contended for, as listed in their brief (page 11), is simply

some %illeged aspect of the total result of the asserted in-

jury to the reservoir and undue ‘drainage of oil and -_

from their lease.

Respondents argue in effect that “correlative rights”

relate on]y to the relative rate of withdrawals. This argu-

ment is plainly unsound. The ‘regulation of the relative

rates of withdrawals as between wells owned by different

producers is only one way of. protecting correlative rights.

“Such orders are usually called “proration orders. * This

case, however, involves not: the rates of w ithdrawals. ‘but

the “manner” of production, through water flooding. The.

opinion of the Commission clearly states that the ‘question

of withdraWals *(the “amount produced) is not involved,

and that the manner of Tidewaier’s production, which was —

the basis of respondents’ complair.t, daes. not cause any

injury to respondents’ correlative rights, but is reasonable '

--and in fact.is the only wav in which correlative rights can

be protected. - Respondents significantly omit’a part of ihe

Commission's opinion (Respondents’ Bricf 10), and we

therefore quote the ‘Commission's opinion, with the omitted

séntence in its proper place, so that the Court. may have

. before it in proper context ‘the Commission's determination

(A51 is

“The question of withdrawals from: the eommon

reservoir is not presented in this complaint involving

the flooding of producing wellf by Water injected dur-

ing a lawful water flood operation. In a water flood

of this tupe the*only way to prevrent.the movement of.

oil from lease to lease. and thus protect correlative

‘rights is to place the’ injection wells on the lease

boundary. Sie | .

“Commission. jurisdiction in’ matters ‘involving

production of dil and gas is by statute limited to the

prevention of waste and the protection of correlative 7

rights. ._No waste of natural resources nor injury to

correlative rights having been shown, it appears that

the. instant proceeding presents no a matter

for action ‘by this Commission.”

The Commission - ‘plainty meant that, no "waste nor

injury to correlative rights having been shown, no ease was

presented which would justify action by the Commission

in stopping. the water flooding. The Commission therefore:

dissolved ine temporary cease and desist “order and dis-_

missect the complaint. ed ”

* The Commission's statement (A47-48, 50> that it was

not the proper forum for awarding. compensatory damages

is not in any way inconsistent with its finding that there

was no injury to correiative rights. A judgment far dam-

‘ ages is a remedz which the Commission cord not ‘grant,

~ but this does not mean that it had no jurisdiction to de-

cide whether’ respondents’ correlative rights had been vio-

‘lated. - The Commission dit have authority to grant ‘an-.

other remedy in. the form of a cease and desist order if

-it had found that there. was injury te respondents’ correla-

' tive rights. The Commission refiised to grant that remedy

because it found that there was no such dniurv shown |

This is the same pivotal question, involving the .same

“overative facts” (482) upon which respondents’ claim in

- this action rests. This question having once been. gated

and decided againsf them, thev cannot by ‘seeking a a.ffer-

ent remedy in: another forum gain’ a right te a second

‘determination of the same issue i

.

2,

. a YG “,

-. , “+ . . 7 = aa

3. The Defense of Esteppel by Judgment Is Fully

Supported by Kansas Law; and the Décision

‘of the Court of Appeals Is. in Conflict with

Applicable State Law.

oe”

%

Petitioner —) this Court has stressed ‘the opinion

- of the Supreme Court of Kansas in. Jac Kson Vv. State Cor-

‘poration Commission, 186° Kan. 6, 348 P.2d 613 (1960), be-

cause it is the decision of the highest court of Kansas de-

termining the * pivotal issue in this’ case .in petitioner's |

favor, in previous litigation between the same parties:

There/¥ould not be, we submit, a clearer or more specific

conflict between a decision of a Court oi Appeals and the

applicable state law ‘than in tne situation which is here

presented, where the Court: of Appeals has ®éached a con-

clusicn directl¥ contrary to the final adjudication of the

very’ same basic issue which was decided in previous iti?

gation between. the same parties hy the highest court of -

IXansas. a?

* On the Kansas law of estoppel by judgment, there was

no need for petitioner to cite Kansas authoriites because

the Court of uae recognized the. Kansas law to be as

follows (A29-30) :

- .*“Kansas adheres to the salutary rule which.

plainly forbids a suitor to{twice litigate matters against

the same party, even on A different cause of action.”

Specifically, as to.the binding effect in general of the

determinations of: the Kansas Corporation Coramission,

the soeauib of Appeals further said (A30, 31):

” We think, however, that a suitor may have a fuld

day in court in an administra tive ‘tribunal, on ‘matters

Within its competence, quite as effectively: and con-

clusively as any other adjudicatory tribunal.

ere

.

“The Ai ero ar € the Kansas Corporation

Commission. of matters within its competence, is un-

doubtedly: binding here, insofar as applicable to this

’ asserted claim.” -.

\

Since the Court. of - Appeals, in the passages . just

quoted, had correctly stated the Kansas law, there was no

rieed for petitioner. to cite cases to support these holdings. .

The. conflict’ with applicable state law arose when the

Court of Appeals refused to follow the Kansas law as de-

cided in the previous litigation between the same parties,

-as to respondents’ complaint that Tidewater’s water flood-

ing was wrongful because it injured respondents’ correla-

tive rights. The decision of the. Court of Appeals 1s in

direct conflict on.that issue with the decision of the high-

est court of Kansas that Tidewater’s water flooding was

not wrongful and should not - -be stopped, hece ause it was

not shewn to cause injury ta respondents’ properté rights.

Respondents, therefore, evidently realizing that if

“the usual ‘rules of estoppel bv judgment are applied in

this case they. would not be entitled to a second litigation

of the “same hasic issue previous!y decided .against ihem,

take the position that the Court of Appeals was wrong in

stating the Kansas law’as to estoppel by judgm ent. Re

spondents contend that Kansas law js (a) that an ad-

judicatior of an issue in a suit for injunctive relief is not’

binding in a’ subsequent damage suit becween the same

parties, on the same facts. ‘Respondents’ P af 143. and

(bh) that a decision of an issue in administrative ‘proceed-

ings does not constitute a bar or estoppe! in subsequer nt:

actions between the same parties in a court, of general

jurisdiction. ‘Respondents’ Brief 16 : .

Respondents do not deny that the law general ac-

certed is what the Court of Appeats called “the salutary

rule which plain!¥ forbids a suitor to twice litigate m mititers

“t) .

AY

i]

” . : 6

.

against the same party, even on a different cause of

- action.” (A29-30) They assert, however, that there is

a peculiar rule in Kansas to the contrary. The cases they

cite do not support their contention. a

In Hojstetter Vv, Myers Construction, Inc., 170 Kan. 464,

‘997 P.2d 115 (1951), discussed in Respondents’ Brief, page

14, the plaintiff first brought a damage suit: in the County

Court and obtained judgment, the defendant then appeal-.

ing the. case to the District Court., While this dainage —

suit was .pending, in the District Court’ the plaintiff and

others brought an injunction suit relating to the same

-mgtter in the District Court. -In the injunction: suit, an

injunction was grarited, but on some: issues findings were

made adverse to the plaintiff. /Later, when" the damage _

suit went to trial in the District Court, the question was

raised whether the adverse findings in the injunction suit)

were binding on the plaintiff in the. damage suit. The

Court stated the question before it as follows (22% P.2d

at 118): ° . i eked

a

“The question With w hich we are contronted. how -

ever,.is whether under the peculiar circumstances the

judgment in the later iniunctiom action is res judicata

ot the isstes in the earlier damage’ action.”

The Court held that the findings in the injunction

suit were net a bar to recovery in the,damage suit, because

the suit for damages was limited to conditions existing be-

fore the injunction suit. was brought, whereas the injunc- .

tion was based on the facts existing at the later time when’

the injunction suit- was tried. As the Court said (227 P.2d

at 119): .

“For anvthint that appears in the ‘record the

manner in which the plant was operated. which plain-.

tiffe in the damage action urged damaged them,.could

lz°

have —— corrected by the time the injunction action

svas tried.”

In other words, éstoppel by judgment was ‘denied, not

because an injunction. was sought in one suit whereas dam-

-ages were sought in the other suit, ‘but because the matter

at issue in the damage suit. involved. conditions at a dif-

ferent time from those at issue in the injunction suit. This

situation obviously does not exist here, because Tidewater’s:

water flooding program, from its beginning -until it is fi-

nally completed according to plans, was involved in the

Kansas proceeding and likewise is involved in this action.

The Chanute Brick &*Tile Company. v. The Ges Belt ,

Fuel Company, 89 Kan. 177, 130 Pac. 649 (1913), discussed:

in Respondents’ Brief, page 15, was a case in which only

a very brief per curiam opinion was written by the Court.

However. in that case also, it is clear even from the brief

opinion that the réason estoppe! ‘by judgment, was not

applied was not the difference in the remedy sought but

because .the subsequent litigation involved a matter not

in issue in the first suit. Immediate!v following what re-

spondents quote in their brief, the Court savs in its opin-

ion {130 Pac. 650): ee

>

“The evider e in the first. suit could not have

tended to sustair@the issue here.” °

The other cases cited ‘bv Cee rd in a footnote on

page th of their brief do not establish any peculiar rule

of estoppel by judgment in Kansas. All that these Cases ‘

hold is that a party relving upon estoppel bv judgment

" must show that the issue in the ‘second litigation w as ac

tua sik raised and determined in'the first suit Tf. as in he

present case, the same basic issue was "raised and was de-

te*mined, then the fact that the plaintiff in the second suit

x

13

. r

is asking for damages rather than for injunctive relief

makes no difference. — ; ave ye

“With reference to respondents’ second contention, it

should be’ noted that .the issue of alleged injury to re-

qpondents’ correlative rights by Tidewater’s water flood-

ing was decided against respondents not. only “py__ the’

7a

: Kansas Commission, but upon appeal its decision was fully

‘ reviewed and in all things approved by the Kansas courts.

It might be that a décision by the Commission alone, re-

garding its juri$diction, would not be binding as a matter

- of Jaw as to the construction of the relevant Kansas stat-

utes. However, that is not the situation here. The Kan-

sas Supreme Coury. has not.only approved the findings of

thé Kansas Commission. but it has also. heldathat its con-

clusions were correct as a matter of law.

|

' The cases cited by respondents do not sustain the con-

clusion that estoppel bv judgment is not applicable because

the original decision — Sespondents: was made by an

NX

Renner v. Monsanto Chemical: Company, 187 Kan. 158,

is’ P.2d 326 (1960), discussed in respondents brief, pages

170 was a suit bv a landowner to cancel an oi] and gas

administr ative agency.

eee The lessee asserted that an order of the Corpora-

tion Commission, allocating production under a proration

Statute and attributing the acreage in guestion to wells

drilled on other lands, was binding upon the question

whether the plaintiff's land had been ac dequately develpped.

The order in question was a general order applicable to a

large number of fields and pools, and there is nothing in

the opinion to indicate. that the landowner was a party t6

proceedings befare the Corporation C ommission _ restt]ting

in the proration order or that there had heen anv judicial >

review of that ortier, Moreover. the Kansas Supreme Court

14

significantly points out that, in the first place, the Com-

- mission was not authorized by the Kansas statute to regu-

late the spacing of wells or to establish drilling units and —

that the proration order, relating i the atiribution of acre-

age to producing oil wells, was not a finding by the Com-

mission that the well would in fact drain the particular

acreage but was simply ‘for the purpose of insuring. that

the well in question would, receive a fair share of the ql-

lowable production. Such being the construction the Court

placed on the Kansas’ statutes, the conclusion naturally

followed that the proration order had no bearing on the

obligation’ of the lessee to develop the leased premises.

This is made-clear by a part of the opinion not quoted by

the respondents, which reads as follows (354 P.2d 336):

“The duty to drill wells under the coveriant is not

che nged since proration invalves only the restriction

of production after the wells are drilled.

“The purpose of the order attributing specific

- acreage to the south four Renner wells was. only to

establish a proration formula for each well to insure

its fair share of the state’s market for crude oil pro-

duced from the Cooper Field, and it did, not constitute a

' finding that those wells would ‘adequately and effec-

. “tively drain. the arreage attributed. or preclude ju-

dicial review of the plaintiffs’ claim of a breach of

the implied covenant to protect the premises peainst

drainage.” eae

‘Gas Serrice Company v Consolidated. Gas Urtilitees

Corporation, 145 Kan. 423 65 P.2d 584 (1987). discussed

in respondents’ Brief, page 17. involved an attack upon

thirte-seven resolutions passed bw the Citv of Wichita. on

the ground that thev had not been adopted in compliance

with a statute requiring that ordinances should be read

and published three times The prior litigation between

the same parties didnot involve These ordinances. but

2

earlier ordinances, which were attacked on entirely dif-

ferent grounds. This point was noted in the opinion of

the Kansas Supreme Court as follows (65: P. 2d at 591):

“The. ground -upon which plaintiff argues here

that the thirty-seven subsequent resolutions are. in-

‘valid was not raised by those pleadings in‘that hear-

-ing as to Ordinance No. 10-306 for the obvious rea-

son that it had been passed in conformance with GS.

1935, 13-2801. Neither was the validity of the three

. subsequent ordinarices that had already been passed

raised in that proceeding. The only question tried out

‘before the Corhinission was whether public conven-

ience and necessity would be served DV permitting

- the companies to enter the field.” ra ae

The Kansas Supreme Court then says that on the ques- |

tion of fact as to whether public convenience and neces- -

_ sity: would be served - by granting the franchise, the Court.

“would not overturn a finding of fact reached by an ad-

ministrative tribunal such as the Commission.’ * The Court

goes on to say, in the language quoted in respondents’ brief,

_ page 16. that on the legal question as to whether the thir-

tv- seven subsequent ordinances were passed in conformity ...

with the statute. the decision of the Commission “would

not have had the binding effect of a- judicial determina-

n.” (65 P.2d 591) It is submitted that the Kansas court

was simply‘ noting the difierence between the effect of

“a fact finding .bv an administrative agency on a matter

within its jurisdiction and its legal conclusion as to the

interpret: ition of a sti tute. Fact -findings of the agency -

are ‘binding on the court if there is substantial ev idence ,

to support them, but’ legai conclusions are not binding on

the court, unless us in this case those conclusions have

been judicially reviewed and approved ‘by the highest

court of the state having jurisdicth 2 SS

“16

State ex rel. Boynton v. Public Service Commission,

135 Kan. 491. 11 P.2d 999 (1932), discussed in Respond-

ents’ Brief, page 17, involved the question of the validity

Bt a statute which authorized the Public Service Commis-

sion upon the complaint of a. shipper +e investigate” ‘and

-~ determine ‘whether a carrier was charging an unreason-

able rate and to issue a certificate as. to What was a rea--

sonable rate or charge, “which shall be prima facie, evi-

dence of the matter therein stated.”. The Court held that

the statute was valid, as against the objection that it gave

the Public Service Commission authority to award. a, final”

judgment for damages in reparation for excessive charges.

Immediately after saying what is quoted in Respondents’ |

Brief, page 17, the Kansas court said (11 P. 2d at 1002): —--

“The recitals*of the certificate are prima facie

-evidence if or when demand for reparation becomes

the subject of controversy before a court of competent

jurisdiétion. It is settled law that the Legislatu re mav

prescribe what. matters shall. have the force of prima

¢ facie evidence.’ cae, cate

This holding. that the statute was valid in making the

‘certificate of the Commission prima facie’ evidence that,

excessive rates had been charged. is fm authority against

‘the application of the Tule ‘ot estappel by_judgment in the

present case where, pursuant to Kansas statutes. ‘the Cor-

- poration Cémmission’s order determining that respond.

ents: correlative rights had not been injured, has beer

reviewed and Affirmed by the Kansas’ courts, both as to

the findings of fact and the lega) conclusions upen which

the order was ‘based.

_. Other cases cited by. respondents. in the litencnes on

page 1° Jf their: brief are not discussed by respondents

_and we see. ‘no point in. discussing them here: They do.

‘ “not relate to” situations comparable to the «se ‘here and,

Co

. ee;

in general, deal with administrative orders which were

_ legislative or executive in nature.. Obviausly such orders

iS e are substantially different from decisions, su¢h as in “this

case, where. the proceedings before the Corporation Com- -

:Sephaesica lcs apa were. instituted by the filing of. the’ “complaint”

‘ _. Water, as “defendant” (R18), containing the usual ele-

. ments of a pleading alleging injury. to respondents” oil and

-Gas properties as.a basis for ‘relief in the nature of an

. denetion to stop Tidewater’s water flooding (R18-22)

and where the Commission proceeded to hear evidence

and made its findings and conclusions in the form of a

‘memorandum opinicn.” (Ad1) The proceedings in this

case before the ‘Commission had every essential element

of a judicial proceeding. This case is w holly different from

by ._ Jackson » Brothers as as “céiviptatnants” “against Tide-.

one Where an administrative agency Issues a législative’

or executive order

Respondents in their brief (page 23, call attention’

to the fact that the Kansas Corporation Commission 1s not

a party to this action. This fact only serves to emphasize

that the proceedings betore the Kansas Commission were

essentially juuicial in character and that the Commission.

in. passing upon Jackson Brothers’ complaint against ‘Tide-

water, Was acting In an impartial and not in u partisan

‘role. There is no. more reason why the Kansas Corpora-

tion Commission. should seek to intervene in this case to

deieri? its determination than thefe «és fer the Judges

‘of the Supfeme Court of Kansas to intervene and defend

their judgment approving in all respects the findings and

conclusions ot the Commission | }

G2 -

-no injury is shown.”

4. Since the Decision by the Kansas Commission

and the Kansas Courts Was Not Only: That

Tidewater’s Operations Were Lawful but Also

That They Did Not Cause Injury to Respond-

ents’ Correlative Rights, This Previous Decision

, Precludes Any Recovery by Respondents on

Any Theory of Liability.

- The decision by the Kansas Commission and the Kan-

sas courts that Tidew ater’s water flooding should not be

‘enjoined was on the. ground that. under the facts as found

by the Commission, the water flooding did not cause waste

and it did not cause injury to Jacksoti Brothers’ correla-

tive rights. The water flooding could not be law ful if it

‘caused mae waste or -injury to respondents’ correlative

rights. The determination that Tidewater’s actions were

lawful is therefore inseparable from the determination

that its actions did not cause injury to respondents’ cor-

relative rights. This case ‘is therefore entirely different

from cases such as those involving condemnation proc eed-

ings, where actions may be’*lawfully taken ‘even: though dam-

age may necessarily follow. The respondents -are " there-

fore barred from recovery of damages 1n this -case,. not

only because there has been a conclusive adjudication that

Tidewater’s water flooding ts lawful under Kansas law, but

also because there has been a final adjudication against

‘Jackson Brothers that Tidewater’s water flooding did not

injure Jackson . Brothers’ preperty rights. On no theory

of liability can there -be any recovery of damages where

; , @

‘Certain! we do not coritencd that one producer can

destroy the property .ot another, wilfully or. negligently.

without responsibility for the tortious act. nor do we con

tend that one man’s property can be, taken direct!y or In-

directly without coWpensation for the benefit ot anotlrer.

. . 19

To ariswer directly respondents’ arguments (Respondents’

Brief 21-22), what we do contend is that where the state

authorities have provided a means, which respondents in

this case have taken advantage of, to have a determination

made as, to whether: a secondary recovery program causes -

‘injury to their property rights. ‘respondents. are bound by

the determination against them and cannot go into a differ-

ent tribunal anc i have the very same issue litigated all over

again. We submit that this conclysion is ‘applicable with

ee particular force where, as in this case, the questions in- —

“volved are pure questions of state law and where the los-

ing litigants in the state courts have switched their forum

to the federal courts in the hope of securing more favora-

ble results. | |

Nonerof the cases cited by respondents to sustain their

claim thai Tidewater can be held liable in damages for its

iawful actions are in point in this case.

Helnis v. Eastern Kansas Oil Company, 162 Kan. 164,

169 Pac. 208. (1917), discussed in Respondents’ Brief 20,

59. was simply a suit for.damages resulting from a nui-

sance caused by the escape of waste oil and sediments from

the defendant’s.refinery into a Water course which passed

across the plaintiff's land. The plaintiff in that case par-

ticularly alleged a cause of action for a “nuisance.” (169

Pac. at 209) The Kansas court does quote in its opiniors

‘general language from the opinion in Hauck v. Pipe Line

Co.. Ltd.. 158 Pa. St. 366, .375, but the reason that the

Kansas court holds that the defendant was liable for the

nuisance was that it found that the particular .acts, cons-

plained of by the plaintiff in that case were both unrea-

sonable and unlawfu! (169 P.2d at page 210):

. When the injurious substances were thrown upon

the: plaintiff's, land: in the excessive quantities and in

the manner ‘set forth. in plaintiff's petition, the de-

“0

dentine use of its — “became both wnreason-

able and unlawful. -

The Helms’ case. is therefore aie ‘not analogous to

. the present. ca. e. ‘Here the particular acts of Tidewater

-complained of by Jackson Brothers have been adjudicated

to be lawful and reasonable by the Kansas Supreme Court

_ in approving the findings and ‘conclusions of the Kansas

Corporation ‘Cornmissisn. The Helnis case is no authority

for imposing - liability upon Tidewater: for its lawful acts,

"and raost certainly itis no authorit’ for a second litigation .

of the issue as to whether Tidewater’s actions injured -

acca Brothers’ property rights in. the oil reservoir.

Respondents also cite three cases alleged to show that

a party biasting with dynamite will be held responsible —

for damage to adjoining property ‘even where the blasting

is done under a permit from some public authority.: It .is

submitted that ‘the’ cases do not even support the state-

ment of their holding as contained in respondents’: brief.

We cannot find anything ° in the opinion in City of Cherry-

- vale v. Studyrin, 76 Kan. 285, 91 -Pac. 60 (1907), indicating

that any permit for blasting was obtained, the court sim-

“ply: holding that ‘the ‘city in that case ‘was not excused

from the exercise. of reas@hable care in blasting. In Rost

v. Union” Pacific Railroad ¢ Company, 95 Kan. 713, 149 Pac.

“an (1915),-the opinion savs that “a permit” had been se-

cured .by ne railroad, but the opinion does not disclose

from whom the. permit had been obtained, or what

provisions were or whether the defendant’ s acts conforme?

to the requirements of the permits. In Bacon v. Raikes,

CoMpany, 109 Kan. 234, 198 Pac. 942 (1921), it affirma:

‘tively appears that the basis for lability sas that the blist-

ing Was not done in conformity with the per mit. Review-_

ing the evidence. the court savs (198 Pac. at 944) that “the

necessarv inference is, the defendant abused its Ge npimrcka

ait ss

. .

eo : | 21

.” using heav y charges located at points not authorized

in 1 the permit “and causing damage that would not have

occurred if the limitations of the permit had beeh ob-—

served. G

-In none of the cases just discussed, nor in the other

cases cited without discussion by respondents on page i

of their brief, was there invoiv ed the-same question as is

presented here, where there has already been a litigation

before a competent ‘state tribunal of the pivotal questfon

which is the basis for asserted liability in this case.

‘

5. ‘The ‘Fact That the Kansas Commission Could .

Not Give a Judgment for Damages ,Does Not

Mean That Its Decision That Jackson Brothers

Had Not Suffered Any Injiry to Their Correla-

tive Rights Would Not ‘Be Binding upon

- Jackson: Brothers in a — Damage Suit.

_ Of cdurse the Kansas Corporation Commission could

hot enter a judgment for damages for alleged injury ‘to the

property rights of gne producer as a result ai the opera-

tions of another producer in the same reset rvoir. In this

sepse,.and only in this sense, Wid. the Cemmission lack

power “to adjudge tort Mabilit’.” ‘The Commission did

have jurisdiction to determine controv erted issues of fact

which would be crucial m determining tort Habilitv as

well as in determining. W hether ‘the Commission shauld

- enter an order requiring the defendant operator to cease

the operations complained of, Specifically in this case”

the Commission had to determine. and it did determine.

that Tidewater’s water flooding did not injure . Jackson

Brothers’ correlative rights before the Commission could

‘awfully refuse Jackson Brothers’ prayer to stop the water

flooding by, Tidewater.. This sare issue, as to W hethe

Jackso n Brothers were injured or on the other hand were *

Lo

eye , °

PZ) “9

benefited by Tidewater's water flooding, is the pivotal

question in this damage action.

The Court of Appeals has in fact on this issue made

two inconsistent stateménts of - law. Near: the begin-

ring of its opinion, it says (A31) aE ak fe

Re “The determinations of ‘the Karisas Corporation

. Commission, of matters within its competence, is un-

-doubtedly binding here, in so far as applicable to this

asserted glaim.:"

_We respectfully submit that: it is impossible to recon-

cile what the Court of Appeals correctly says is the law

in the passage just ‘quoted above, ‘with what it later says

«? as its reason ‘for refusing to sustain the defense of estoppel

' by judgment (A32):

“It is wholiv inadmissible and incompatible w ith -

fundamental principles of due process to hold that “a

tribunal, possessing no power to adjudge tort liability,

mav nevertheless deprive a tort claimant of his.dav in

court on that basis, by conclusive adjudication of the

operative facts upon. which: his claim must rest.”

The answer to this latter. inconsistent statement is

obvi ious. . Respondents hare had ther day. in court in the.

_ previous litigation, where there was, a determination of

the same “operative facts” upon: which their claim must

rest in this case. ~The Kansas District Court specifically,

held that Jacksori Brothers “have now had the.r dav in

court and had a determination of their correl ative rights

(A53) The Kansas Supreme Court upon appeal. ais

that the trial court had held that ° ‘plaintiffs had now had

their day in court and ‘their correlative ° ‘rights had heen

determined” (A61 >. and the Kansas Supreme Court held

@

to

Sy

Me

that the trial court was correct in affirming: the. decision

of the Commission based on its findings. (A63)

Surely every requirement of due process has been

amply satisfied where . not only has the administrative

agency given a full hearing and. decided the .issues made 3 |

by the parties’ pleadings and evidence, but also its decision

has been reviewed and affirmed by courts of competent

Jurisdiction.

Tidewater has already gone through one protracted

litigation before the Kansas Commission and in the Kansas.

courts defending its same water flooding program’ against

the same complaints of injury which Jackson Brothers

assert in this. proceeding. _Tidewater should not be re- *

>)

quired to litigate al] over again in the federal courts the

same basic issués fs .to the “operative facts”. which «were

finally decided in Tidewater’s favor by the Kansas courts.

“a

s

‘CONCLUSION.

- Respondents attempt to belittle the importance of this

case (Respondents’ .Brief 23) by s saving. that while the

amount ff the judgment is large, the case is of no conse-

quence t¥ anvone except the partiés. Once again respond-

‘ents’ argument runs counter to self-evident reality. How

° _ . ,

will it be possible (if the Court of Appeals’ decision is not

corrected) for an oil producer to preceed with confidence

with a secondary recovery. program ‘knowing that the

competent state agency and the state courts may be

“second guessed”: by the federal courts and that he mav

~.he penalized bv a huge judgment for damages for doing

the verv’same things that have been authorized and ap-

proved bv the s tate authorities as 2 means of conserving

the state's natural resources and. as @ proper-method to be

ed

‘24°

employed for the protection of the correlative rights of

other producers in the same common reservoir? -

The crippling effect of the decision of the Court of —

Appeals upon secondary recggry “programs is obviously

of grave public concern. The memoraridum opinion of.

the Kansas Corporation’ Commission, in this case_ “shows

that Tidewater’s water flooding program will “permit the

recovery, of oil and gas which would otherwise be lost.”

that the cumulative productior. from Tidewater’s secondarv ;

recovery project din this reservoir, from 1949 to 1956, was

“some 2 857, 785 batrels of oil from approximately 900

- aeres” and that comparable secondary recovery can be

‘expected from additional. areas in the, same reservoir

through continued water flooding (A50). It. can. hardly

be said under such circumstar~es ‘that the result of stop-

ping this water flooding program would be “of no can-

sequence to anvone exccpt the pn and the defend-

ant.’

Of course it is senseless to argue that .Tidewater's :

water flooding project has. not been “interfered with.”

‘Respondents’ Brief 22). Nothing could paraivze second: *

arv. recovery programs a uicker -than a huge judgment for

‘damages for doing what even the Court of Appeals holds _

. to be acts whieh were tommitted “under color, and ‘in ac- ,

cordance with. Kansas fav’ and were “lawfully oer

taken and law fuliv done. in the interest of conservation.”

, (A389) e

© : ‘* ; Pp

It is sybmitted that the conflict between the decision -

“of. the Conkt of Appeals and the applicable. Kansas law is

- «not merely a matter of private concern. It is also an im-

‘pottant matter of public concern. relating directly to the

administration of justice as hefween the’ state and federal

courts: For these ‘reasans netitioner pravs that the writ

G

25

of certiorari be granted and the judgments | below: be re-

versed. a — &

5 ; Respectfully submitted,

James P. Hart,

904 Brown Building.

Mastin 1, Texas, $

CLE E. WILLBeRN, .

P. O. Box 1404,

Houston 1, Texas,

Cari C. CHASE,

Eureka, Kansas,

* A. W. HERSHBERGER,

RicHarp JONES,

— Wituram P. THOMPSON,

» H.E. JONEs,

1022 Union Center Building,

_ Wichita 2, “Kansas,

Attorneys for Petitioner.