# Brief for the Petitioners — Burford v. Sun Oil Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386403_0172%3A04 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the Petitioners - **Published:** January 1, 1943 - **Citation:** 319 U.S. 315 ## Text Supreme Court of the United States OCTOBER TERM, 1942 No. 495 G. E. BURFORD, ET AL., Petitioners Vv. Sun O1L CoMPANY, ET AL., Respondents BRIEF FOR PETITIONERS v GERALD C. MANN Attorney General of Texas Ep Roy SIMMONS JAMES D. SMULLEN Assistant Attorneys Genera] Attorneys for Petitioners, Railroad Commission of Texas and its Members F. L. KUYKENDALL 4 James P. HART Austin, Texas Attorneys for Petitioners, G. E. Burford, Et Al. FIRM FOURDATION—AUeTIN a > PP Ge wp ew ——s Subject Inde.:—Continued Page 4, Even if the duty rested upon the District Court to exercise its independent juagment in determining the reasonableness of the Railroad Commission’s order under the state ‘law, the District Court heard sufficient evi- dence to justify its holding that the order is Railroad Commission v. Rowan & Nichols Oil _ valid ‘under the state law 26 Conclusion 33 TABLE OF CASES City of Stuart v. Green, 91 F. (2d) 603 12 Henderson v. Carbondale Coal & Coke Co., 140 U.S. 25 |. 15 Humbie Oil & Refining Co. v. Potter, 143 §. W. (2) 136 33 Humble Oil & Refining Co. v. Railroad Com- ‘mission, 94 S. W. (2d) 1197 a McNeny v. Railroad Commission, 96 S. W. (2d) 96 32 Magnolia Petrcleum Co. v. New Process Pr»- duction Co., 129 Tex. 617, 104 S. W. (2d) 1106. | 30, 32 Company, 310 U.S. 573 7 17, 18, 19, 26 TABLE OF CASES- Continued Page Railroad Commission v. Rowan & Nichols Oil Company, 311 U.$.570 7, 17, 18, 19, 26 Kailroad Commission v. Shell Oil Ca., 161 S. W. (2:¢) 1022 8, 22, 23 Railroad Coinmission v. Wencker, 161 S. W. (24) 800 | 32 Re yy Oj! & Gas Co. v. Railroad Commission, aoe t. (2d) 334 Be ee ee ie a “Cakoil Petroleum Corporation v. Railroad Com- mission, 86 S. W. (2d) 57 30 Stanolind O03] & Gas Co. v. Edgar, 1078. W. (2d) 631 CD OE EI Stanolind Oil & Gas Co. v. Railroad Com- mission, 107 S. W. (2d) 633 _ 30 Thoinsen v. Cayser, 243 U.S. 66. 15 Toledo Seale Co. v. ee Scale Co., 261 U. & 399 14 Wencker y. Railroad Commission, 149 S, W. (2d) 1009 | 30 Constitution Fourteenth Amendment, United States Constitution Ree Seon 3, 4 TABLE OF CASES—Continued Statutes Judicial Code, Section 126 Judicial Code, Section 240 28 U.S. Code, Section 223 28 U.S. Code, Section 347 28 U.S. Code, Section 350 | Vernon’s Annotated Civil Statutes, Art. 6049¢, Sec. 8 Court Rules Rules, U. S. Circuit Court of Appeals, Fifth Cireuit, Rule 3 Rules of Civil Procedure, Rule 6(c) Rules of Civil Procedure, Rule 59(b) .. ““ - Page 20 13 15 Supreme Court of the United States OCTOBER TERM, 1942 No. 495 G. E. BURFORD, ET AL., Petitioners V. SUN OIL COMPANY, ET AL., Respondenis BRIEF FOR PETITIONERS OPINIONS BELOW No formal opinion was written by the District Court. but findings of fact and conclusions of law were filed (R. 88-92). Three opinions have been Written by the Circuit Court of Appeals. On Decem- her 29, 1941, the Circuit Court of Appeals wrote a unanimous opinior. (R. 409) affirming the judgment of the District Court, which opinion is reported in 124 F. (2d) 467. The first petition for rehearing (R. 415) filed by the respondents, Sun Oi} Company, et al., was overruled without opinion on February 2, 1942 (R. 421). The respondents, Sun Oil Com- pany. et al., filed a second petition for rehearing on June 1, 1942, (R. 421) and on July 11, 1942, the Circuit Court of Appeals wrote an opinion granting ~ the second petition for rehearing, setting aside its former judgment, and reversing the judgment of the District Court (R. 429). Judge McCord wrote a spe- cialeenturring opinion (R. 440). These opinions are reported in 130 F. (2d) 10, 18. On August 12, 1942, the Circuit Court of Appea!s wrote an opinion denying the motion of Republic National Bank of Dallas for leave to file a petition in intervention in the nature of a petition for rehearing (R. 474). Judge McCord dissented from this opinion (R. 476). These opinions are reported in 130 F. (2d) 18, 19. JURISDICTION The jurisdiction of the Supreme Court of the Unit- ed States is invoked under Section 240 of the Judicial Code. as amended by the Act of February 13, 1925 (U.S. C., Title 28, Sec. 347). The judgment to be re- viewed waz entered on July 11, 1942 (R. 440), and these petitioners’ petition for rehearing was denied on August 13, 1942 (R. 477). The petition for a writ of certiorari was filed in this Court on October 27, 1942, and was granted on December 14, 1942. STATEMENT OF THE CASE This suit was brought by the Sun Oil Company, a New Jersey corporation, against G. E. Burford an? the Railroad Commission of Texas and its mem! vers. all Texas citizens, and X.Y.Z Oil & Gas Company, an Oklahoma corporation, to set aside and nullify an fe order entered by the Railroad Commission dated June 2, 1939 (R. 31) permitting Burford to drill four oil wells upon his 2.33 acre lease in the East Texas Oil Field and to enjoin the drilling and production of oil from such wells. In the a:ternative, it was prayed that production from these wells be enjoined until the Kailroad Commission should restrict the produc- tion from such wells to an amount in proportion to the acreage of said lease (R. 29). Jurisdiction was alleged by reason of diversity of citizenship and also because of plaintitf’s claim that the Railroad Com- mission’s order violated its property rights under the 14th Amendment to the Constitution of the United States (R. 2}. Magnolia Petroleum Company, a Texas corporation, was permitted to intervene as 2 plaintiff, alleging that the Railroad Commission’s order violated its property rights under the 14th Amendment (R. 34). Both the plaintiff and the in- tervener attacked the validity of the Railroad Com- mission’s order under the state law, under the pro- visions of Article 6049c, sec. 8, Vernon’s Annotated Texas Civil Statutes*, as well as under the Federal Constitution. *This statute reads as follows: Any interested person affected by the conservation Jaws of this >iute rolating ¢« erude petroleum oi! or natural gas, and the waste thereo’, including this Act, or by any rule, regulation or order made or promulgated by the Commission thereunder, and who may be dis- satisfied therewith, shall have the right to file a suit in a Court of competent jurisdiction in Travis County, Texas, an not elsewhere, agvinst the Commission, or the members thereof, as detendants, to test the validity of such laws, rules. reguiations or orders. Such suit shall be advanced for trial and be determined as expeditiously as possible and no postponement thereof or continuance shall be grant- ed except for reasons deemed imperative by the Court. In all such trials, the burden of proof shall be upon the party complaining of such laws, role, regulation or order; and such laws, rule, regulation or order so complained of shali be deemed prima facie valid.” sialic The grounds of attack under the Fourteenth Amendment were that the Railroad Commission did not hear “substantial evidence” justifying the grant- ing of the permit (R. 15-17, 20), that such evidence as was heard was not properly considered by the Rail- road Commission (R. 14-15) and that the permit order would give Burford an unreasonable ‘advan- tage in drainage opportunity.” (R. 23, 25). The same grounds on which the Railroad Commis- sion’; order was asserted to be invalid under the Fourteenth Amendment were also urged as grounds for striking down the order under the state law, and the following additional grounds of attack under ihe Texas statutes were also urged: (1) that the Rail- road Commission had ne authority under the state law to eonsider the 2.33 acre tract as a separate tract in determining whether a permit should be granted to drill wells as exceptions to the spacing rule, be- cause of the narrow dimensions of the tract (KR. 9): (2) that a judgment of the state court of Travis County, in Cause No. 54,769, in that court, nullify- ing a permit granted October 11, 1934, to drill a we! upon the same tract of land, which judgment was en- tered January 31, 1935, had the effect of making the question of the right to drill any well upon the 2.55 acre strip res judicata (R. 12); (3) that the Rail- road Commission was without jurisdiction to grant the Burford permit because of the pendency of an- other suit in the state court in Travis County. in Cause No. 53,915, involving the validity of a permi' dated February 1, 1934, granted to a previous lessee upon the same tract of land (R. 15). soicdlsias The case was fried by the District Judge without a jury. The evidence included the transcripts of the testimony taken at the three hearings before the Railroad Commission-{R. 233-366) and also original evidence relating to the reasonableness of the Rail- road Commission's order (R. 366-399), and the pro- cedure before the Railroad Commission (R. 213- 250). The evidence showed that the permittee, G. E. Bur- ford, was the owner of an oil and gas lease on a nar- row strip of land containing 2.33 acres in the East Texas oil field. Prior to 1939, no wells had been drilled cn Burford’s lease (R. 381, 391). Sun Oil Company owns a 50 acre lease immediately west of Burford’s tract, en which it has drilled seven wells, and Magnolia Petroleum Company owns a 50 acre lease immediately east of Burford’s tract, on which it has drilled six wells (R. 104, 150, 399). The wells drilied by Sun Oil Company and Magnolia Petroleum Company, prior to the Railroad Cornmission’s hear- ing in 1938, had already produced about 5,000 bar- rels of oil per acre, or about 250,000 barrels from each lease (R. 347). Because of the location of these leases in the extreme eastern portion of the East Texas oil field, all of this oil has been replaced by oil migrating from other leases (R. 347). These wells on the Sun and Magnolia leases have drained and are still draining oil from Burford’s lease (R. 243-245) as well as from other surrounding tracts. Without the wells granted by the Railroad Commission, Bur- ford would have no opportunity to recover the oil un- der this tract og its equivalent. Of the four wells eae ae drilled by Burford on his lease, one was a dry |w!. ee ee agency should take the testimony and make the find- ings of fact, and that the findings should be binding on the court, is foreign to the law of this state.” (16! S. W. (2) at p. 1028.) The federal rule that the findings of a board, if supported by evidence are con- clusive, is repudiated in Texas. (161 S. W. (2d) at p. 1028.) Evidence must be taken anew in the court. (161 S. W. (2d) at p. 1029.) “Whether the agency hear sufficient evidence is not material. In fact, the evidence heard by the agency is not per se admissible upon the trial in the District Court.” (161 S. W. (2d) at p 1030.) ~ It is evident that the process which must be fol- lowed by the Texas courts under the decision of the Texas Supreme Court, in determining whether tie order of the Railread Commission is val’d un’: © state law, is very different from the process to be followed by a federal court in determining whether the order is valid under the 14th Amendment. Oth» wise, there would have been no point in the Circu‘t , Court of Appeals’ action in reversing the judgment of the District Court, since the Circuit Court of A)- peals in its first opinion had already held that the order was valid under the Federal Constitution (12! I. (2d) at p. 470.) This part of its opinion has not been withdrawn by the Circuit Court of Appeals. (130 F. (2d) at p. 19.) The opinion of the Cireu'* Court of Appeals must mean, therefore, that it is in- cumbent upc 1 the federal court to determine the validity of the Railroad Commission’s order under the state law by exercising an “independent jiide- ment” upon the reasonableness of the order, disre- —_— = garding any evidence that may have been heard by the Railroad Commission and any findings which it may have made upon such evidence, and determining for itself what constitutes “substantial evidence’’ to support the Commission’s order. it is submitted that this conclusion of the Circuit Court of Appeals is in direct conflict with the de- cisions by this Court in the Rowan & Nichols cases. In those cases, it was plainly stated that the Federal courts would go no further in testing the validity of an order of the Railroad Commission under the State’s statutes than they would in testing its valid- ity under the Federal Constitution. This Court’s lan- guace in the first Rowan & Nichols case is as follows (310 17. S. at p. 584): “What ought not to be done by the federal courts when the Due Process Clause is invoked ought not to be attempted by these courts under ‘he guise of enforcing a state statute. Whether the respondent may still have a remedy in the state courts is for the Texas courts to determine, and it is not foreclosed by the denial, on the crounds we have indicated, of the extraordinary relief of an injunction in the federal courts.” In the second Rowan & Nichols case, this Court, In passing on the constitutional issue, said (311 U.S. at p. 446): “Nor, on the basis of intrinsic skills and equip- ment, are the federal courts qualified to set their ndependent judgment on such matters against i =— = that of the chosen state authorities.” (Our em- ' phasis.) ; This Court further held that the District Court i in striking down the order on the ground that ‘did not prorate production on a “reasonable basis.” saying (311 U.S. at p. 577): ; : “In denying the petition for rehearing in the eurlier cases we held that whatever rights the ~tate statute may afford are to be pursued in the ~tate courts, 311 U.S: 614." °, In hoiding, as it has in this ease. that the District Court must ge beyond the inquiry which is nece pesary in order to test the validity of the Railroad Com! -ion’s order under the Due’ Process Clause iad must follow the rule of the state courts and exercise its “independent judgment” on a trial de novo to de- termine the reasonableness of the order under state statute, the Circuit Court cf Appeals has hei! contrary to the decisions ef this Court just referre! ta, Even it the duty rested upon the District Cov exercise its independent judgment in determin) the reasonableness of the Railroad Commission's 0’ der under the state law, the District Court heard sufficient evidence to justify its holding that the or- der is valid under the state law. To sustain their attack ene the validity of the Railroad Ccommission’s order, the respondents of- fered and the District Court ‘admitted in evidence the applications, protests, notices, and orders of the Railroad Commission pertaining to this particular nepmit (P. 156-161, 224), the coneral snacing orders of the Pailroad Commission relating to the East Texas Field (R. 111-132). nlats. deeds, and stipu- lations of the parties affecting title to the permit strip and the adjacent lands (R. 104-110, 212), cop- * previous ordere of the PRailread Cemmission granting permits to drill on the permit strip and court proceedings relating thereto (R. 164-208), »«transeripts of the evidence heard by the Railroad Commission at the three hearings upon this permit (R. 233-384), the original testimony of the Rail- road Commission examiner who conducted the hear- ines rerarding the manner of taking the testimony ond his report to the Railroad Commission (R. 213- 2"), and the original testimony of a petroleum en- ‘neor as to the drainage of oil to and from the ner- mit trip and adjacent leases. (R. 366-383) To sustain the order, the respondents offered the original testimony of two witnesses, A. O. Phillips, he drilling contractor who testified as to the facts revavding the four wells drilled under the permit R. 40- 342), and Gordon Griffin, a petroleum en- gineer, who testified as to the geological facts in connection with the East Texas field and this pav- ‘icular area. (R. 393-398) The testimony of J. D. Copeland, the Railroad — Commission examiner (R. 213-230), relstoa to the contention asserted by the resnon“eincs that the Rail- road Commission 4i4 +:ct ytve proper consideration to the evidence introduced at the hearings conducted by the examiner. (R. 14, 36.) The District Court found that a fair and proper consideration of the evidence was given by the Railroad Commission (R. 89-90). This ground for attack upon the order has been abandoned by the respondents, having never been raised at any time in the Circuit Court of Ap- peals or in the cross-petition for certiorari which was filed in No. 496, October Term, 1942, in this Court, entitled Sv» Oi Company, et ai. Vo G. ©. Burford. The remaining grounds for attack upon the valid- ity of the Railroad Commission’s order under the state law were (1) that the 2.33 acre strip was 4 voluntary subdivision from a larger tract, made af- ter the adoption of the Railroad Commission's s)ac- ing rule, and under the Texas decisions could 2" he considered by the Railroad Commission 2s a s+- arate tract in granting a permit to drill a well as an exception to the spacing rule to prevent the con- tiscation of property (R. 20); (2) that a perm: granted on October 11, 1934, to Burford’s predeces- sor in title had been cancelled by ‘a court order en- tered January 11, 1955, and that this court order made the validity of the present order res judiceta (R. 12); (3) that at the time of the issuance of the railroad Commission’s permit order, a suit was then pending in the state courts attacking the validity of still another permit, which had been granted Febru- ai. < ary 1, 1934, and that because of the pendency of such suit the Railroad Commission did not have juris- diction to consider Burford’s application (R. 13); and (4) that in any event, the Railroad Commission ebused its discretion in granting a permit for four wells instead of a lesser number (R. 20-25). The District Court found that “‘the issues of law an] fact are with the defendants” (R. 87) and con- cluded that “the various matters of state law raised present no federai question and furthermore present no matter of such merit as to warrant the issuance of an injunction.” (R. 91.) On the plea of res judi- cata, the court found that the conditions in the East Texas oil field and on the leases adjacent to the Bur- ford tease had so changed since the entry of the court order in 1935 that the plea should be overruled. (R. Of); The District Court’s judgment is clearly sustain- «under the state law: (1) The Railroad Commission was entitled to ons:der the 2.32. acre strip as a separate tract. At the ‘ime of the subdivision of the 2.33 acre tract from the west 50 acres lease to fun Oil Company, in vee ‘bruary, 1931, the spacing rule in the East Texas ' ‘ field provided for spacing distances of 150 feet fn om property lines and 300 feet from other produc- ing oil wells (R. 11). Converted to acreage. the rule contemplated the drifting of one well-to about 2.07 «cres. The strip is too narrow, (49 feet x 2,131 feet) ‘» allow the drilling of a Weil without a special per- a mit, but since the total area exceeds the area con- templated by the rule, the Railroad Commission may consider it as a separate tract. Humble Oil & Refin- ing Co. Vv. Railroad Commission, 94S. W. (2d) 1197 (Texas Civil Appeals, application for writ of error refused by Texas Supreme Court); Wencker v. Ra’’- road Commission, 149 S. W. (2d) 1009 (Texas Civil Appeals. application for writ of error ‘dismissed, correct judgment,” Texas Supreme Court}. (2) Where conditions have changed since the entry of a judgment cancelling a permit order, the Railroad Commission may grant a new permit and its findings that conditions have changed are pre- sumptively valid. Magnolia Petroleum Company V. New Process Production Company, 129 Tex. 617, 104 S. W. (2d) 1106; Stanolind Oil & Gas Co. v. Edgar. 1078. W. (2d) 631; Stanolind Oil & Gas Co. v. Ra’l- road Commission, 107 S. W. (2d) 633: Shell Petro- leum Corporation V. Railroad Commission, 86 S. W. (20) 67 (Texas Civil Appeals, application for wr-t of error dismissed). The District Court’s finding (R. 90) that conditions had so changed as to justify the Railroad Commission in granting the permit here under attack is sustained by evidence of the drilling of additional wells on adjacent tracts (R. 376, 395) so as to Cause admitted drainage of Burford’s lease (R. 243, 244) as well as notorious changes in pres- sure, water encroachment and heavy withdrawals of oil from the reservoir during the intervening years (R. 375). (3) The pendency of a suit attacking another — permit, issued on February 1, 1934, to a predecessor intitle of Burford, did not deprive the Railroad Com- mission of jurisdiction to consider and grant, Bur- ford’s application. This early permit was granted witheut notice and hearing and was attacked on that cround by the Sun Oil Company in the suit in uestion (R. 195). Sun Oil Company immediately cbtained an ex parte restraining order on May 30, 1°°4 against the drilling of any well under this per- mit (R. 204). This permit was thereupon abandoned ly the permittee and no attempt was made to assert | any rights under this permit. At the hearing ct the Railroad Commission on Burford’s application in 1938, it was stated without contradiction that the February, 1934, permit “has been abandoned long since’ (R. 237, 292.) After the Burford permit was granted, the state court finally on November 29, 1939, entered a judgment setting aside the 1934 permit on the sole ground that the 1934 permit was entered “without notice and hearing as required by law,” the judgment being without any adjudication on any other issue, and without prejudice to the rights of any of the parties “to apply to the Railroad Commission of Texas for other permits to drill oil and gas wells at such places on the tract of land above mentioned as they may desire.” (R. 209, 210.) (nder the Texas law, since the 1934 permit was enter“] without notice or hearing, the Railroad Commission never acquired jurisdiction to grant the permit, and the court on appeal had no power to ad- jadicate the merits, but could only set aside the order ‘or Want of jurisdiction on the part of the Railroad a ee Commission to grant it. Magnolia Petroleum Co. \. New Process Production Co., 129 Tex. 617, 104 S. W. (2d) 1106. In other words, the merits of the right to drill a well on this strip was not a matter pend- ing before the court, and therefore the Railroad Com- mission's jurisdiction, upon proper notice and hear- ing, 'o pass upon a new application, was not ousted. Furthermore, the February, 1934 permit had been abandoned, and such abandonment gave the lease- owner the right to apply for a new permit, McNeny vV. Railroad Commission, 96 S. W. (2d) 96, especially where conditions are shown to have changed. Vaq- nolia Petroleum Co. v. New Process Production Co.., supra; Railroad Commission V. Wencker, 161 5. WS. (2d) 800 (Texas Civil Appeals). (4) The Railroad Commission did not abuse its discretion in granting a permit to drill four wells instead of only one. This, of course, is a matter pe- culiarly within the discretion of the Railroad Com- mission. The evidence sustains the Railroad Com- mission’s action.. This strip was segregated from the Sun Oi] Company lease in 195i (R. 4), bot? wells were permitted to be drilled upon the strip un- til 1959 (R. 39). In the meantime, beginning in 1932 (R. 263), Sun Oil Company had drilled seven we!ls on its lease, and Magnolia Petroleum Company he’ drilled six wells on its lease (R. 399), which had produced 100° of the recoverable oil originally un- der their leases (R. 286), all of which had been re- placed bv oil drained from other leases (R. 286, 347). It was conceded that both the Sun and the Magnolia wells were draining Burford’s lease (R. 243-245) onlin The zeologic conditions in this area, which is on the eastern edge of the East Texas field, are extremely erratic (R. 397), making it highly uncertain whether a location will be a producer or not. In fact, of the four wells drilled under the present permit, one has turned out to be a dry hole and another has turned out to be a pumper (R. 391). Under the Texas de- cisions, the relative density of drilling is not neces- ary conelusive; the Railroad Commission may properly consider the iength of time adjacent leases h... been producing and the amount of oil already prolaced by them. Humble O11 & Refining Co. v. Pot- ‘ev, 143 8S. W. (2d) 135 (Texas Civil Appeals). CONCLUSION For the reasons stated, it is respectfully submitted that the judgment of the United States Circuit Court i Appeals shouid he reversed. GERALD C. MANN Attorney General of Texas Ep Roy SIMMONS JAMES D. SMULLEN Assistant Attorneys General p £ et Attorneys for Petitioners,