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In re Samson Resources Corp.

United States District Court, D. Delaware

August 23, 2017

IN RE SAMSON RESOURCES CORPORATION, et al. Debtors.
v.
SAMSON RESOURCES CORPORATION, Appellees. LLOYD AND MARY NESS, Appellants, Civ. No. 16-1156-RGA

MEMORANDUM

         Pending before this Court is a pro se appeal from a Memorandum Order (B.D.I. 1346)[1]and an order denying reconsideration of same (B.D.I. 1661) entered by the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), which disallowed and expunged proofs of claim filed by Appellants in the Chapter 11 cases. For the reasons set forth below, the appeal is dismissed for lack of subject matter jurisdiction.

         1. Background.

         This appeal arises out of an oil and gas lease ("Ness Lease") between Appellants and a predecessor to the Debtors, which created a one-sixth royalty interest in the oil and gas produced from wells drilled on Appellants' property in North Dakota. The Debtors drilled and operated ten wells on the property. Although the Ness Lease provides for a one-sixth aggregate royalty, Appellants and certain relatives each own a fraction of this one-sixth interest based on their divided ownership of the property.

         2. On September 16, 2015, Samson Resources Corporation, together with certain affiliates ("Debtors"), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. Appellants filed a proof of claim in conjunction with several relatives in the Chapter 11 cases (Claim Nos. 559, 753, 869, 1798, 1799, 1800) ("Ness Claims"). The Ness Claims allege that the Debtors have improperly calculated royalty payments and have debited improper deductions. Mr. Ness's claim asserted "$75, 000 - $1, 000, 000" for royalties allegedly owed by the Debtors to Mr. Ness, plus interest at an annual rate of 18 percent. Mr. Ness's claim also states that the claim is secured and entitled to priority pursuant to section 507 of the Bankruptcy Code.

         3. On February 16, 2016, the Debtors objected to the Ness Claims (B.D.I. 675, 677) ("Ness Objection"), and the parties subsequently engaged in discovery. On July 6, 2016, the Bankruptcy Court held an evidentiary hearing on the Ness Objection. (B.D.I. 1151, 7/6/16 Hr'g Tr.). Although Appellants did not file a written response to the Ness Objection, Appellants raised several arguments at the evidentiary hearing, including, inter alia, that (i) relevant case law, which permits the deduction of post-production costs from royalty payments, was inapplicable to gas from Appellants' wells; (ii) the Ness Lease predated the relevant case law and therefore it should not apply to their Claims; (iii) the automatic stay should be modified, or in the alternative, that the Bankruptcy Court should abstain from hearing the Ness Objection, to allow the North Dakota courts[2] to hear this matter; and (iv) post-production costs of gas that exceed the amount the gas is sold for should not be netted against oil royalties. (See B.D.I. 1346 at 7).

         4. On September 13, 2016, the Bankruptcy Court entered the Memorandum Order, finding that: the amount of the royalty payments was calculated starting with the market price received for the oil or gas and is divided among the fractional interest holders of each well (see B.D.I. 1346 at p. 5); Debtors then subtracted the fractional costs for post-production expenses from the royalty payments prior to issuing royalty checks (id.); from November 2012 to January 2016, Debtors made royalty payments to Mr. Ness totaling approximately $48, 123.49 (id.); and during that period, Debtors deducted post-production costs of, at most, $1, 930 from Mr. Ness's royalty payments (id. at pp. 6, 22). The Memorandum Order, inter alia: modified the Ness Claims to be asserted against the correct Debtor (id. at p. 8); reclassified the Ness Claims as general unsecured claims for disputed amounts, if any, occurring prior to the petition date (id.); determined that post-production expenses are properly charged against royalties under North Dakota law (id. at pp. 9-13); declined to modify the automatic stay or abstain from hearing the Ness Objection (id. at pp. 14-20); and ultimately disallowed and expunged the Ness Claims (id. at p. 24).

         5. On September 27, 2016, Appellants filed a Motion for Alteration Amendment of a Judgment of a Claim Worthy or Pursuit, in Order to Take New Testimony, Amend Findings of Fact and Conclusions of Law, or Make New Ones, and Direct the Entry of a New Judgment as per Fed Rules of Civ. Procedure Rule 59(a)(1)(B) (B.D.I. 1408) ("Reconsideration Motion"). On October 17, 2016, Appellants supplemented the Reconsideration Motion (B.D.I. 1570) ("Supplement"). The Bankruptcy Court treated the Reconsideration Motion and Supplement as a motion for reconsideration under Federal Rule of Civil Procedure 59.[3] The Bankruptcy Court held another hearing to discuss Appellants' arguments on November 16, 2016 and subsequently denied the requested relief. (B.D.I. 1661) ("Reconsideration Order").[4] On December 7, 2016, Appellants noticed their appeal of both the Memorandum Order and the Reconsideration Order. (D.I. 1). The notice of appeal was filed 21 days after the entry of the Reconsideration Order.

         6. On February 15, 2017, the Court held a telephonic hearing and the parties agreed to a briefing schedule. (D.I. 8). Appellants did not comply with Bankruptcy Rule 8009, which requires an appellant to designate "items to be included in the record on appeal and a statement of the issues to be presented." Fed.R.Bankr.P. 8009(a)(1). On March 22, 2017, Appellants filed their opening brief, which, according to Appellants, refers to "new evidence" that Debtors improperly calculated and withheld royalty payments. (See D.I. 12 at pp. 2-3). On April 21, 2017, Debtors filed their answering brief, asserting that this Court lacks subject matter jurisdiction over the appeal because it was not timely filed. (See D.I. 13 at pp. 6-9). Debtors further argue that Appellants are seeking to improperly assert new evidence and new arguments in the appeal (id. at pp. 9-10); that the Bankruptcy Court correctly determined that the Ness Claims were barred by state law (id. at pp. 10-14); and that the Bankruptcy Court did not commit clear error in refusing to consider new evidence in connection with Appellants' Reconsideration Motion (id. at pp. 14-16).

         7. Jurisdiction and Standard of Review.

         The Court has appellate jurisdiction over all final orders and judgments from the Bankruptcy Court. See 28 U.S.C. § 158(a)(1). Bankruptcy Rule 8002 provides: "Except as provided in subdivisions (b) and (c), a notice of appeal must be filed with the bankruptcy clerk within 14 days after entry of the judgment, order, or decree being appealed." Fed.R.Bankr.P. 8002(a)(1).[5] The Third Circuit has held that the failure to appeal a bankruptcy court's ruling to the district court within the time period established by Bankruptcy Rule 8002 deprives the district court of jurisdiction to hear an appeal. See In re Caterbone, 640 F.3d 108, 113 (3d Cir. 2011).

         8. Discussion.

         Fourteen days from the date of entry of the November 16, 2016 Reconsideration Order was November 30, 2016. The appeal was not filed until December 7, 2016, seven days after the 14-day period under Bankruptcy Rule 8002(a) had expired. Although the Bankruptcy Rules alone cannot create or withdraw jurisdiction, Congress has limited the jurisdiction of this Court to hear an appeal from a final order of a Bankruptcy Court by specifically incorporating the time limits of Rule 8002 in the jurisdictional grant to the district courts to hear appeals from bankruptcy courts. Section 158(c)(2) of title 28 provides that "an appeal under subsections (a) and (b) of this section shall be taken in the same manner as appeals in civil proceedings generally are taken to the courts of appeals from the district courts and in the time provided by Rule 8002 of the Bankruptcy Rules." 28 U.S.C. § 158(c)(2) (emphasis added).

         9. The Third Circuit has held on several occasions that the time limits of Bankruptcy Rule 8002 are jurisdictional and deprive an appellate court of subject matter jurisdiction if the appellant fails to comply. See Caterbone, 640 F.3d at 112-13 (citing S'holders v. Sound Radio, Inc., 109 F.3d 873, 879 (3d Cir. 1997); Whitemere Dev. Corp., Inc. v. Cherry Hill Twp., 786 F.2d 185, 187 (3d Cir. 1986); In re Universal Minerals, Inc. 755 F.2d 309, 311 (3d Cir. 1985)). In Caterbone, the court stated that:

[b]ecause Section 158 ... specifies the time within which an appeal must be taken - i.e., "in the time provided by Rule 8002" - that requirement is jurisdictional... Here, even though it is a bankruptcy rule that specifies the time within which an appeal must be filed, the statutory incorporation of that rule renders ...

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