Opposition Brief — BTA Oil Producers v. MDU Resources Group

No. 02-263

Jn The CLERK |

Supreme Court of the diese staes—

¢

BTA OIL PRODUCERS, ET AL.,

Petitioners,

V.

MDU RESOURCES GROUP, ET AL.,

Respondents.

¢

On Petition For Writ Of Certiorari

To The North Dakota Supreme Court

¢

RESPONDENTS MDU RESOURCES GROUP, INC.’S

AND WILLISTON BASIN INTERSTATE

PIPELINE COMPANY’S BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

¢

JAMES S. HILL

Counsel of Record

DANIEL S. KUNTZ

ZUGER KIRMIS & SMITH

P.O. Box 1695

Bismarck, ND 58502-1695

(701) 223-2711

Counsel for Respondents

MDU Resources Group,

Inc. and Williston Basin

Interstate Pipeline

Company

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

I. Did the petitioners timely raise a substantial federal

question in the state court proceeding to provide the

Court with jurisdiction under 28 U.S.C. § 1257?

II. Was the North Dakota Supreme Court’s denial of the

petitioners’ claim of unjust enrichment arbitrary and

irrational in violation of substantive due process un-

der the Fourteenth Amendment?

STATEMENT PURSUANT TO RULE 29.6

Respondent MDU Resources Group, Inc. is a publicly

traded corporation. Respondent Williston Basin Interstate

Pipeline Company is an indirect wholly owned subsidiary

of MDU Resources Group, Inc. No publicly held company

owns 10% or more of the stock of MDU Resources Group,

Inc.

ill

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED........................cccecceeeeeeees i

STATEMENT PURSUANT TO RULE 29.6............... ii

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EE REIS... cannpadussennsunceecseusesccseses 2

REASONS THE WRIT SHOULD BE DENIED......... 3

I. The Petitioners Failed to Raise a Substantial

Federal Question in the State Court Proceed-

RAE SER AS SER ERAS, aS ao a 3

Il. The Petitioners Failed to State a Federal

TR ia ia ari de calle aue enabncibbebpechtoneorawete 6

A. The petitioners failed to show a property

right in a contract or cause of action ....... 8

B. The petitioners failed to show that the

state courts denial of the petitioners’

claim of unjust enrichment was arbitrary

i ccs piccantovisddontosauvacses 12

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iv

TABLE OF AUTHORITIES

Page

CASES

A&A Metal Buildings v. I-S, Inc., 274 N.W.2d 183

Sans SUI ahsehieichivssaictesbbastll-oisctsicaeadiptliaieiditeaah tated natal thai tiietan bate! 14 |

Adams v. Robertson, 520 U.S. 83, 117 S.Ct. 1028, |

OE ae EO ccciiviiececentenertectincen dotcecasetnaaneont 3,4 |

|

Albrecht v. Walter, 572 N.W.2d 809 (N.D. 1997).......... 14, 15

Apache Corp. v. MDU Resources Group, Inc., 1999

ie me Lk 8 | ne Gre ree meen S passim

BTA Oil Producers, et al. v. MDU Resources Group,

Inc., 2002 ND 55, 642 N.W.2d 873............. 3, 9, 10, 13, 14

Bankers Life & Casualty Co. v. Crenshaw, 486 U.S.

71, 108 S.Ct. 1645, L.Ed.2d 62 (1988) ..............0.0... 4

Board of Directors of Rotary Int'l v. Rotary Club of

Duarte, 481 U.S. 537, S.Ct. 1940, 95 L.Ed.2d 474

re cticastensicceasnietiinaihciepiacasiaiihiniaiacidlhiaihies nae iaidictenenbahiinniiiatsenes 4

Buchalter v. People of State of New York, 319 U.S.

427, 63 S.Ct. 1129, 87 L.Ed. 1492 (1943)................. 11

Concrete Pipe & Products of Cal., Inc. v. Construc-

tion Laborers Pension Trust for Southern Cal.,

508 U.S. 602, 113 S.Ct. 2264, 124 L.Ed.2d 539

ATi snccicinssidkatiehiesesttansskialsohaes tieeadhdatanndteiscncta ta pepaiabaibasiemteanee 7

County of Sacramento v. Lewis, 523 U.S. 833, 118

S.Ct. 1708, 140 L.Ed.2d 1043 (1998) ..0.... ec eeeeeeeee 6

Eastern Enterprises v. Apfel, 524 U.S. 498, 118

S.Ct. 2131, 141 L.Ed.2d 451 (1998) ..................ccccceeeees 6, 7

Exxon Corporation v. Governor of Maryland, 437

U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978)................ 7

|

TABLE OF AUTHORITIES — Continued

Page

Fisher v. Fisher, 546 N.W.2d 354 (N.D. 1996)..............0..... 5

Herndon v. Georgia, 295 U.S. 441, 55 S.Ct. 794, 79

Rees: MA CII sihiscidncsosnicaatiia biibihuctie deciusalainn deiienactialascsapnicate 5

In Re R.O., 2001 ND 137, 631 N.W.2d 159... 5

Koch Hydrocarbon Company v. MDU Resources

Group, Inc., 988 F.2d 1529 (8th Cir. 1993) ..........0000.... 2,8

Midland Diesel Service & Engine Co. v. Sivertson,

I Fa ee re A Be Rsicccinn pininnicebtaicinlicdnamniennas 14

Pentax Corp. v. Robison, 135 F.3d 760 (Fed. Cir.

BN itiiicickcsndnnsciovibcnshiinadekessasinaaibiianisasanamoncnaies 5

United States v. Carolene Products, 304 U.S. 144,

58 S.Ct. 778, 82 L.Ed. 1234 (1938) ..................cccssesseeeeees 7

Washington v. Glucksberg, 521 U.S. 702, 117 S.Ct.

See ee Fe REED sibitinincstinsitcchhshecoldlinlenancink 7

Webb v. Webb, 451 U.S. 493, 101 S.Ct. 1889, 68

i Ae ET CE iiss citsictiskcesicuccanaceatnimnseoncnenatanaeendnicnicl 4

Williamson v. Lee Optical of Oklahoma, 348 U.S.

483, 75 S.Ct. 461, 99 L.Ed. 563 (1955) ........ ee. 7

Worcester County Trust Co. v. Riley, 302 U.S. 292,

OS E.CK. TG, Se Ke Bee. BO (IRB T) necescsccescesessvensnssisrsentens 11

STATUTES

Be A. OF SE titkisintnritinnndnimeitienacannae 3, 11

Se Sas. AEF seknsitsconmnsesiennnenethieimnnnae 3

TABLE OF AUTHORITIES — Continued

Page

RULES

Supreme Court Rules, Rule 14.1(g)(i) ...............ccccceeeeeeeeeees 4

Federal Rules of Appellate Procedure, Rule 40.................. 4

North Dakota Rules of Appellate Procedure, Rule

OD ...ncosccsovncstvbddnssacvotserntiecssasctedsisuieliilianamaiataananncnna 5

OTHER SOURCES

Dan B. Dodds, Law of Remedies, § 4.9(4) (2d. ed.

1

STATEMENT OF THE CASE

I. Facts.

The petitioners sold casinghead natural gas to Koch

Hydrocarbon Company (“Koch”). Koch processed the raw

gas at its plant in North Dakota and sold the processed

products. The contracts between the petitioners and Koch

did not set a fixed price for the casinghead gas. Instead,

Koch paid the petitioners a price based, in part, on a

percentage of the proceeds received by Koch from the sale

of the processed products. The processed products included

residue natural gas that Koch initially sold to Montana-

Dakota Utilities Co. which subsequently became a division

of MDU Resources Group, Inc. (“MDU”).

MDU reduced its purchases of residue gas from Koch

in 1983 because of an oversupply of natural gas. In 1985,

MDU assigned its gas purchase contracts to its subsidiary

Williston Basin Interstate Pipeline Company (“WBI”). Also

in 1985, a dispute arose between Koch and WBI over the

proper price under their contracts as a result of the de-

regulation for certain categories of natural gas. After

January 1, 1985, WBI paid for the gas it purchased from

Koch in accordance with WBI’s contract interpretation

that deregulated gas was to be priced at a reasonable

market price. In 1987, WBI curtailed all its purchases

from Koch after the parties were unable to reach agree-

ment on various disputes. The residue gas not purchased

by WBI was sold by Koch on the open market and the

petitioners were paid for their casinghead gas based on the

market prices received by Koch.

Koch sued MDU and WBI in the United States Dis-

trict Court for North Dakota in 1987 for breach of contract.

In awarding judgment against MDU and WBI, the district

2

court reduced Koch’s damage claim by 75 percent finding

that, for the most part, Koch’s contracts with its producers

were percentage-of-proceeds contracts with the split

averaging 25 percent to Koch and 75 percent to the pro-

ducers. On appeal, the United States Court of Appeals for

the Eighth Circuit affirmed the district court’s reduction in

Koch’s damage claim reasoning that Koch should be

allowed to collect only the damages it sustained. Koch

Hydrocarbon Company v. MDU Resources Group, Inc. , 988 |

F.2d 1529, 1547 (8th Cir. 1993). The case was remanded to

the district court for a determination of damages. Koch |

and WBI then settled.

II. Proceedings Below.

The petitioners, as disappointed third party suppliers,

brought an action in North Dakota District Court in 1997

against MDU, WBI and Koch claiming the petitioners

were entitled to the additional revenue they would have

received if Koch had sold its residue gas to WBI at the

prices provided in the contracts between WBI and Koch.

[App. C, I] The petitioners alleged state claims against

MDU and WBI of unjust enrichment, implied trust and

civil conspiracy. [App. I] The petitioners also brought

separate unrelated claims against Koch regarding treating

fees and revenues from liquid hydrocarbons that were

factors into the calculation of the price paid for the casing-

head gas under their contracts. [App. C, I] None of the

claims asserted against MDU, WBI or Koch alleged a

violation of the United States Constitution or a United

States statute. [App. I]

pn SPOR a

The trial court granted summary judgment dismissing

the claims against MDU and WBI based on the precedent

———

3

regarding similar claims in Apache Corp. v. MDU Re-

sources Group, Inc., 1999 ND 247, 603 N.W.2d 891. The

petitioners appealed from the trial court judgment to the

North Dakota Supreme Court. The North Dakota Supreme

Court affirmed the trial court’s dismissal of the petitioners’

claims. Contrary to the petitioners’ statement, the opinion

of the North Dakota Supreme Court is reported. BTA Oil

Producers, et al. v. MDU Resources Group, Inc., 2002 ND

55, 642 N.W.2d 873. The petitioners subsequently filed a

Petition for Rehearing which alleged, for the first time, in

one paragraph, that the state court judgment denied the

petitioners equal protection of the law and due process of

the law under the Fourteenth Amendment to the United

States Constitution. [App. G-2] The North Dakota Su-

preme Court summarily denied the Petition for Rehearing.

[App. F]

J

REASONS FOR DENYING PETITION

I. The Petitioners Failed to Raise a Substantial

Federal Question in the State Court Proceed-

ing.

The petitioners assert the Court has jurisdiction

under 28 U.S.C. § 1257(a) to review the judgment of the

North Dakota Supreme Court. Section 1257(a) allows

review of a state court judgment by writ of certiorari

where the validity of a state statute is “drawn in question”

on a federal ground, or a federal right, privilege, or immu-

nity is “specially set up or claimed.” The Court has held

that in reviewing a state court judgment under 28 U.S.C

§ 1257, it will not consider a petitioner’s federal claim

unless it was either addressed by, or properly presented to,

the state court that rendered the decision. Adams vw.

zs

Robertson, 520 U.S. 83, 87, 117 S.Ct. 1028, 1029, 137

L.Ed.2d 203 (1997). Rule 14.1(g)i), S.Ct.R., requires a

petitioner to show that the federal question was timely

and properly raised in the state court proceeding. When

the highest state court is silent on the federal question

presented to the Court for review, the Court assumes the

issue was not properly presented. Id. The petitioner has

the burden of defeating the assumption by demonstrating

the state court had a fair opportunity to address the

federal question. Webb v. Webb, 451 U.S. 493, 501, 101

S.Ct. 1889, 1894, 68 L.Ed.2d 392 (1981).

The petitioners concede they first raised their federal

question in their Petition for Rehearing to the North

Dakota Supreme Court which denied the Petition for

Rehearing in summary fashion without addressing the

federal question. The Court has generally refused to

consider issues raised for the first time in a petition for

rehearing when the state court is silent on the issue.

Board of Directors of Rotary Int'l v. Rotary Club of Duarte,

481 U.S. 537, 549-550, 107 S.Ct. 1940, 1947-1948, 95

L.Ed.2d 474 (1987). The Court’s refusal to consider ques-

tions first presented in a petition for rehearing is consis-

tent with the petitioners’ need to show the issue was

raised “‘at the time and in the manner required by the

state law.’” Bankers Life & Casualty Co. v. Crenshaw, 486

U.S. 71, 77-78, 108 S.Ct. 1645, 1650, 100 L.Ed.2d 62

(1988), (quoting Webb v. Webb, supra at 501).

Rule 40, N.D.R.App.P., requires that a petition for

rehearing of an appeal to the North Dakota Supreme

Court “shall state with particularity the points of law or

fact which in the opinion of the petitioner the court has

overlooked or misapprehended.” [Emphasis added] The

North Dakota Rule is based on Fed.R.App.P. 40. See,

5

Explanatory Note, N.D.R.App.P., Rule 40. Although the

rule has not been interpreted by the North Dakota Su-

preme Court, the state court is guided by and gives great

deference to any federal case law interpreting the federal

counterpart. Fisher v. Fisher, 546 N.W.2d 354, 355 (N.D.

1996). Under the federal rule, the United States appellate

courts will not address legal theories raised for the first

time in a petition for rehearing. Pentax Corp. v. Robison,

135 F.3d 760, 762 (Fed. Cir. 1998) (the theory presented in

a petition for rehearing was not overlooked or misappre-

hended on appeal because it was never presented). Accord-

ingly, raising a federal question for the first time in a

petition for rehearing was not sufficient to properly pre-

sent the question to the North Dakota Supreme Court.

Despite presenting eighteen issues for review [App. H

2-4], the petitioners did not raise a federal question in

their appeal of the trial court’s judgment to the North

Dakota Supreme Court. Even if a federal question had

been raised in the appeal to the North Dakota Supreme

Court, the issue still would not have been timely raised

because it was never presented to the trial court as evi-

denced by its lack of mention in the trial court’s Memo-

randum Opinion and Order for Judgment. [App. D, C]

Issues not raised in the trial court, even constitutional

issues, generally will not be addressed on appeal by the

North Dakota Supreme Court. In Re R.O., 2001 ND 137,

631 N.W.2d 159.

Nor can the petitioners contend they could not have

anticipated either the trial court or North Dakota Su-

preme Court judgment and therefore they were denied a

reasonable opportunity to have the federal question heard

and determined in the state court proceeding prior to the

petition for rehearing. See, Herndon v. Georgia, 295 U.S.

6

441, 55 S.Ct. 794, 79 L.Ed. 1530 (1935). Both the trial

court’s ruling and the North Dakota Supreme Court's

affirmance were based upon Apache Corp. v. MDU Re-

sources Group, Inc., 99 ND 247, 603 N.W.2d 891, in which

the North Dakota Supreme Court affirmed a denial of

claims essentially identical to those presented by the

petitioners. [App. A-10; D-4] The petitioners, who filed an

amicus curiae brief in Apache, could not have been sur-

prised that trial court and the North Dakota Supreme

Court ruled consistent with the recent precedent of Apache

particularly when MDU/WBI relied on the Apache prece-

dent in seeking summary judgment dismissal of the

petitioners’ claims. [App. E-4]

Il. The Petitioners Failed to State a Federal

Question.

The petitioners contend the North Dakota Supreme

Court violated the substantive due process requirements

of the Fourteenth Amendment by depriving the petitioners

of property through denial of “their causes of action and

contract rights without a rational basis and in an invidi-

ously discriminatory manner.” The constitutional guaran-

tee of substantive due process under the Fourteenth

Amendment to the United States Constitution protects an

individual against arbitrary and irrational exercises of

government power. County of Sacramento v. Lewis, 523

U.S. 833, 845, 118 S.Ct. 1708, 1716, 140 L.Ed.2d 1043

(1998). Although the Court gives heightened scrutiny to

alleged substantive due process violations of fundamental

rights and liberties, the Court has been hesitant to subject

economic legislation to due process scrutiny as a general

matter. See Eastern Enterprises v. Apfel, 524 U.S. 498,

ee ee SP ee I ee I ee EP a tS tae ee PU LT RA

Ss

““‘—. at

7

547, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998); Exxon Corpo-

ration v. Governor of Maryland, 437 U.S. 117, 98 S.Ct.

2207, 57 L.Ed.2d 91 (1978); Washington v. Glucksberg, 521

U.S. 702, 720, 117 S.Ct. 2258, 2267, 138 L.Ed.2d 772

(1997); Williamson v. Lee Optical of Oklahoma, 348 U.S.

483, 75 S.Ct. 461, 99 L.Ed. 563 (1955). The Court applies a

much more deferential review in substantive due process

challenges to economic legislation. Concrete Pipe & Prod-

ucts of Cal., Inc. v. Construction Laborers Pension Trust for

Southern Cal., 508 U.S. 602, 113 S.Ct. 2264, 124 L.Ed.2d

539 (1993). Government actions adjusting the burdens and

benefits of economic life have a presumption of constitu-

tionality and the burden is on the party complaining of a

due process violation to establish the action was arbitrary

and irrational. Eastern Enterprises v. Apfel, supra at 524.

The challenge fails if the government action is rationally

related to a legitimate government purpose. United States

vu. Carolene Products, 304 U.S. 144, 152, 58 S.Ct. 778, 82

L.Ed. 1234 (1938).

The petitioners, in their attempt to fashion a federal

question from the North Dakota Supreme Court’s applica-

tion of North Dakota common law principles of unjust

enrichment, do not contend there was a violation of one of

the fundamental rights and liberties identified by the

Court for heightened scrutiny. Eastern Enterprises uv.

Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451

(1998). Indeed, the petitioners fail to establish either a

property interest entitled to substantive due process

protection or arbitrary and irrational governmental action

by the North Dakota Supreme Court.

8

A. The petitioners failed to show a property

right in a contract or cause of action.

The petitioners’ contention that they were denied

their cause of action and contract rights assumes, of

course, that the petitioners had contract rights or a cause

of action that were denied by the state court. The petition-

ers acknowledge they had no contracts with MDU or WBI.

And unlike the plaintiffs in Apache Corporation v. MDU

Resources Group, Inc., 1999 ND 247, 603 N.W.2d 891, who

unsuccessfully claimed they were third party beneficiaries

to the contracts between WBI and Koch, the petitioners

did not assert any contract claims against MDU/WBI.

[App. I] Instead, the petitioners’ claims against MDU/WBI

were limited to equity claims of unjust enrichment and

implied trust. [App. I]

MDU/WBI’s contracts were with Koch and not with

the petitioners. The damages for breach of those contracts

were determined by the district court in Koch’s action

against MDU/WBI and affirmed by the Eighth Circuit

Court of Appeals. Koch Hydrocarbon Company v. MDU

Resources Group, Inc., 988 F.2d 1529 (8th Cir. 1993). The

Eighth Circuit Court affirmed an award of damages

against MDU/WBI for breach of the contracts based upon

the amount of damages sustained by Koch:

_ The District Court found that, for the most

part, Koch’s contracts with other natural gas

suppliers who provided some of the gas that Koch

in turn sold to MDU were percentage-of-proceeds

contracts. Under these contracts, Koch would

process the gas and sell what amounts it could

for the best available price, then pay the pro-

ducer a percentage of the proceeds from those

9

sales. Concluding that the split averaged sev-

enty-five percent to the other producer and

twenty-five percent to Koch, the court reduced

the price damages Koch claimed by seventy-five

percent.

In this appeal, Koch argues that the damage

award should not have been reduced, since Koch

may yet be obligated to reimburse the producers

for their seventy-five percent share. We reject

this argument. The court did not enforce the con-

tract by ordering specific performance but merely

awarded Koch its actual damages. MDU was not

ordered to take the gas and pay for it, in which

case Koch would be liable to the producers for a

percentage of the proceeds. The other producers

did not intervene in Koch’s suit, and Koch should

be allowed to collect only the damages it sus-

tained. If the gas was not sold, Koch did not owe

the producers their cut; if Koch did sell to other

customers the gas that MDU contracted to buy,

Koch presumably paid the producers the appro-

priate percentage from those proceeds, and the

producers would have no further recourse

against Koch.

988 F.2d at 1547.

The petitioners had no contract rights either in the

contracts or contract prices between WBI and Koch. At

best, the petitioners had an expectancy that the natural

gas they produced would be processed and the residue gas

sold by Koch at the contract prices contained in the con-

tracts between Koch and WBI. See, BTA Oil Producers uv.

MDU Resources Group, Inc., 2002 ND 55, 735, 642 N.W.2d

873, 884. That expectancy, however, did not create a

contract right. The petitioners’ contracts were with Koch

Hydrocarbon. They have not shown or even claimed, with

10

the exception of an unrelated issue regarding treating fees

and liquid hydrocarbons, that they were not paid in the

proper manner by Koch under their contracts. If the

petitioners wanted a contract right to obtain prices for

their gas equal to the contract prices contained in Koch’s

contracts with WBI, those prices could have been specified

in the petitioners’ contracts with Koch. Instead, the

petitioners negotiated percentage-of-proceeds contracts

that entitled them to a price based on the proceeds re-

ceived by Koch from the actual sale of the gas without

regard to whether that gas was sold under contracts with

WBI or to another party. As determined by the North

Dakota Supreme Court, the petitioners received full

performance under the terms of their contracts with Koch.

BTA Oil Producers v. MDU Resources Group, Inc., 2002

ND 55, 944, 642 N.W.2d 873, 886.

The petitioners’ assertion that they were denied a

property interest in the form of a cause of action against

MDU/WBI is also without merit. The trial court deter-

mined, and the North Dakota Supreme Court affirmed,

that the petitioners did not have a cause of action against

MDU/WBI. BTA Oil Producers v. MDU Resources Group,

Inc., 2002 ND 55, 927, 642 N.W.2d 873, 882-883. Although

petitioners argue they satisfied each of the elements to

establish a cause of action for unjust enrichment under

North Dakota common law, the North Dakota Supreme

Court disagreed and determined that the petitioners, like

the plaintiffs in Apache, failed to establish the essential

element of recovering under a theory of unjust enrich-

ment; i.e., “receipt of a benefit by the defendant from the

plaintiff which would be inequitable to retain without

paying for its value.” BTA Oil Producers v. MDU Resources

Group, Inc., 2002 ND 55, 921, 642 N.W.2d 8738, 881,

11

quoting Apache Corporation v. MDU Resources Group,

Inc., 1999 ND 247, 915, 603 N.W.2d 891. The North

Dakota Supreme Court declined the petitioners’ invitation

to overrule the holding in Apache that when the alleged

impoverishment results from a valid contractual arrange-

ment made by a party, such as the percentage of proceeds

contracts between the petitioners and Koch, the result is

not contrary to equity and there has been no unjust

enrichment. Id. at 423.

Only if the Court independently reviews and deter-

mines contrary to the decision of the North Dakota Su-

preme Court that the petitioners had a cause of action for

unjust enrichment under North Dakota common law, can

the petitioners meet the threshold requirement of a

property interest entitled to substantive due process

protection. This Court, however, does not exercise jurisdic-

tion under 28 U.S.C. § 1257 to review state law questions

and the Fourteenth Amendment does not permit a party

“to bring to the test of a decision in this court every ruling

made ... in a state court.” Buchalter v. People of State of

New York, 319 U.S. 427, 430, 63 S.Ct. 1129, 1131, 87 L.Ed.

1492 (1943).

The North Dakota Supreme Court is the ultimate

authority on issues of North Dakota common law. Pursu-

ant to that authority, the petitioners had no cause of action

against MDU/WBI. Even if the petitioners could show that

the North Dakota Supreme Court somehow erred in the

application of its own common law principles of unjust

enrichment, the Fourteenth Amendment does not guaran-

tee that decisions of the state courts are free from error.

Worcester County Trust Co. v. Riley, 302 U.S. 292, 299, 58

S.Ct. 185, 188, 82 L.Ed. 268 (1937).

12

B. The petitioners failed to show that the

state court’s denial of the petitioners’

claim of unjust enrichment was arbitrary

and irrational.

The petitioners allege the North Dakota Supreme

Court’s dismissal of their unjust enrichment claim was

invidious, arbitrary and capricious because the Court's

ruling benefited the primary utility in North Dakota at the

expense of gas producers who were neither incorporated

nor had their principal place of business in North Dakota.

The petitioners cite cases in support of their position that

the Court has struck down as unconstitutional disparities

in treatment of in-state and out-of-state interests. The

cited cases, however, involve alleged violations of the

dormant Interstate Commerce Clause and not alleged

violations of substantive due process.

The petitioners are unable to meet their burden of

showing that the North Dakota common law principles of

unjust enrichment, or their application by the North

Dakota Supreme Court, were arbitrary and irrational. The

North Dakota Supreme Court relied upon its prior opinion

in Apache Corp. v. MDU Resources Group, Inc., supra,

which held that where the impoverishment results from a

valid contractual arrangement made by a party, the result

is not contrary to equity. 1999 N.D. 247 at 415. In support

of its opinion in Apache, the state court quoted an expla-

nation from Dan B. Dodds, Law of Remedies, § 4.9(4), page

482 (2d Ed. 1993) regarding the applicability of restitution

in three-way commercial transactions. Dodds explained

that in transactions involving three parties where the

parties could have contracted each with both others but

did not do so, the separate contracts convey the limited

kinds of liability and exposure each party intends. The

13

state court quoted Dodds that “[rJespect for that contract

arrangement requires the courts to refuse restitution

between the parties who did not contract with each other.”

Apache Corp. v. MDU Resources Group, Inc., 1999 ND 247,

714, 603 N.W.2d 891 (quoting Dan B. Dodds, Law of

Remedies, § 4.9(4) at 482).

Therefore, the North Dakota Supreme Court’s denial

of the petitioners’ unjust enrichment claim was not only

consistent with its prior application of unjust enrichment

principles, but also consistent with restitution principles

recognized by other authorities. In contrast, as noted by

the North Dakota Supreme Court, the petitioners have

never cited a single decision from any jurisdiction allowing

third party suppliers such as the petitioners to recover for

unjust enrichment under facts similar to those presented

in this case. BTA Oil Producers v. MDU Resources Group,

Inc., 2002 ND 55, 923, 642 N.W.2d 873, 882.

The petitioners provide no support for their assertion

that the North Dakota Supreme Court’s ruling was based

upon the residency of the parties. On their face, the unjust

enrichment principles relied upon by the state court apply

regardless of the residency of the parties. The principles,

on their face, are neither arbitrary nor irrational. Nor is

there anything in the North Dakota Supreme Court’s

opinion that suggests its application of the common law

principles was influenced by the residency of the parties.

Although Montana-Dakota Utilities Co. is a primary

natural gas distributor in North Dakota, it also distributes

natural gas in other states. WBI is an interstate pipeline

company operating under the jurisdiction of the Federal

Energy Regulatory Commission. It provides service in

states other than North Dakota. Ironically, it was the

petitioners who championed that they represented “oil and

14

gas producers and agricultural interests, which are among

the cornerstones of [North Dakota’s] economy.” [App. H-16]

The petitioners argued that if the North Dakota Supreme

Court affirmed the trial court judgment, “purchasers of

processed or manufactured products will reap windfalls at

the expense of local producers.” [App. H-18] The North

Dakota Supreme Court, however, applied the principles of

unjust enrichment consistent with the facts and North

Dakota common law without regard to the geographic

interests of the parties.

The petitioners argue the North Dakota Supreme

Court “dramatically diverged” from the language of the

state court’s traditional five element test of unjust enrich-

ment in order to deny the petitioners their cause of action

and contract rights. The North Dakota Supreme Court's

holding in this proceeding, and in Apache, that a party

asserting a claim for unjust enrichment must establish

that the claimed enrichment must be a “benefit at the

direct expense” of the complainant has been consistently

recognized by the state court. See A&A Metal Buildings v.

I-S, Inc., 274 N.W.2d 183 (N.D. 1978); Midland Diesel

Service & Engine Co. v. Sivertson, 307 N.W.2d 555 (N.D.

1981). The parties in both of the above cited cases appear

to have been North Dakota parties. Similarly, the North

Dakota Supreme Court cited Albrecht v. Walter, 572

N.W.2d 809 (N.D. 1997) for the proposition that “[wJhen

the impoverishment results from a valid contractual

arrangement made by a party, the result is not contrary to

equity”. BTA Oil Producers v. MDU Resources Group, Inc.,

2002 ND 55, 7 23, 642 N.W.2d 873, 882. This proposition is

an adjunct of the fourth of the North Dakota Supreme

Court’s frequently stated elements of unjust enrichment

that there must be an absence of a justification for the

15

enrichment and the impoverishment. Apache Corp. uv.

MDU Resources Group, Inc., 99 ND 247, 913, 603 N.W.2d

891, 894. In Albrecht v. Walter, supra, the North Dakota

Supreme Court determined that a payment contribution

from the defendant to the plaintiffs would not constitute

unjust enrichment because the contribution was consistent

with a valid contractual arrangement made by the defen-

dant. The parties were North Dakota residents.

The North Dakota Supreme Court consistently ap-

plied North Dakota principles of unjust enrichment in

affirming the dismissal of the petitioners’ claims against

MDU and WBI without regard to the residency of the

parties. Those principles are rationally related to the

state’s interest in defining when the courts of North

Dakota will provide equitable relief to parties. The North

Dakota Supreme Court rationally determined that it will

not provide an equitable remedy of unjust enrichment

when the party’s alleged impoverishment results from a

contract arrangement made by the party.

¢

16

CONCLUSION

The Petition for a Writ of Certiorari should be denied.

Respectfully submitted,

JAMES S. HILL

Counsel of Record

DANIEL S. KUNTZ

ZUGER KIRMIS & SMITH

P.O. Box 1695

Bismarck, ND 58502-1695

(701) 223-2711

Counsel for Respondents MDU

Resources Group, Inc. and

Williston Basin Interstate

Pipeline Company

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