Sonda Decision: The Fourth Circuit Sends Motion to Dismiss Challenge to West Virginia Pooling Act Back to Federal Court

On January 31, 2024, the U.S. Court of Appeals for the Fourth Circuit (the Fourth Circuit) reversed and remanded the opinion of the U. S. District Court for the Northern District of West Virginia (the District Court), holding that the District Court erred in its abstention order in Sonda v. the West Virginia Oil and Gas Conservation Commission, No. 22-2271.

In 2022, West Virginia amended its oil and gas conservation law by adding West Virginia Code § 22C-9-7a (the Statute), authorizing the unitization of nonconsenting interest owners’ mineral tracts in horizontal well units. Two mineral interest owners (the Interest Owners) filed suit against the West Virginia Oil and Gas Conservation Commission (the Commission) in the District Court, challenging the constitutionality of the Statute. The Interest Owners claimed that the Statute violated their rights under provisions of the U.S. Constitution and the Constitution of West Virginia. The Commission filed a motion to dismiss, arguing that the Interest Owners lacked standing and failed to state a claim upon which relief can be granted. Subsequently, the District Court dismissed all but two claims, which were brought pursuant to the U.S. Constitution. However, the District Court did not address the Commission’s arguments for dismissal of the remaining two claims, including the lack-of-standing defense. The District Court abstained from ruling on the two counts, invoking the Pullman abstention doctrine, asserting that West Virginia constitutional law was “directly germane to the issues presented.” Thus, the District Court stayed the matter so that the Interest Owners could present the state law issues in West Virginia state court. The Commission appealed.

On appeal, the Fourth Circuit held that the District Court abused its discretion by abstaining and staying the federal court case. While a federal court may abstain and invoke the Pullman doctrine, such action is an extraordinary and narrow exception to the rule that a federal court must exercise its jurisdiction. The Pullman doctrine only applies when “there is (1) an unclear issue of state law presented for decision [and] (2) the resolution of which may moot or present in a different posture the federal constitutional issue such that the state law issue is potentially dispositive.” Here, the Fourth Circuit recognized that the District Court improperly applied the Pullman doctrine. First, the District Court merely concluded that West Virginia law was “directly germane” without further analysis or clarification. Second, the District Court issued a stay so that the Interest Owners “may” present their claims in state court. Third, an “unclear issue of state law” was not identified pertaining to the remaining two claims, the federal law claims. Additionally, the District Court did not address the Commission’s argument that the Interest Owners lacked standing. Because standing relates to the District Court’s jurisdiction over the matter, the Fourth Circuit held that the District Court should have decided the issue of standing first. Therefore, the Fourth Circuit reversed the District Court and instructed that it address the Commission’s standing argument prior to any other arguments on remand.

The energy and energy litigation attorneys at Steptoe & Johnson PLLC have experience in guiding energy professionals through these issues, including the filing of applications for horizontal well pooling. For assistance or questions about this alert, please contact the authors or a member of the Energy Team or Energy Litigation Team.