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Rule No. 1: Never Gamble With The Statute Of Limitations

One of the very first things I was told by the senior partner when I started practicing law was that there isn’t an honest mistake that can’t be fixed, except blowing the statute of limitations. As a result, my calendar has limitations periods blocked out weeks, months and in some cases years in advance, and if there’s ever a question of when it runs, I use the earliest date. The Tenth Circuit’s decision in Impact Energy Resources, LLC v. Salazar, Nos. 11-4043 & 11-4057 (Sept. 5, 2012 10th Cir.), is a cautionary tale to those who may not be as conservative.

In December, 2008, the Bureau of Land Management (“BLM”) held an auction for certain oil and gas leases in Utah. These leases were challenged by a variety of interests on several grounds and as a result of one of those lawsuits, a federal district court granted an injunction prohibiting the BLM from entering into leases on some of the parcels. On February 4, 2009, after the issuance of the injunction, the Secretary of the Interior (the “Secretary”) held a press conference and issued a press release, widely reported in the media, announcing that the BLM would not issue the leases on the parcels subject to the injunction. Two days later, on February 6, the Secretary signed a memorandum to the BLM’s Utah State Director which directed that the 77 parcels be withdrawn from the lease auction. Six days later, on February 12, 2009, the BLM sent letters to the highest bidders notifying them of the decision.

On March 13, 30 days after the notifications were sent, several energy companies who had been the high bidders filed an administrative appeal of the lease withdrawals to the Interior Board of Land Appeals (the “IBLA”). The appeal was dismissed on jurisdictional grounds, but during the proceedings the BLM made it clear that it believed that the action the energy companies were attempting to challenge was the Secretary’s decision as contained in the February 6 Memorandum. Moreover, in the decision dismissing the appeal, the IBLA expressly refused to opine on whether “final action” was taken on February 6 or on some later date.

While one would think that counsel for the energy companies would note this dispute as relevant to any statute of limitations analysis, apparently they did not. On May 13, 2009, ninety days after February 12, 2009, letters were sent (more than ninety days after the February 6 Memorandum was issued), the energy companies filed suit challenging the Secretary’s authority to withdraw the leases. Because the Mineral Lease Act (“MLA”) requires that any action to contest a decision by the Secretary be commenced within ninety days of “the final decision of the Secretary relating to such matter,” 30 U.S.C. § 226-2, the Secretary moved for dismissal of the case as time-barred,[1] and the district court granted the motion.

In its 18-page plurality opinion affirming the dismissal, supplemented by two concurrences and one dissenting opinion, the Tenth Circuit held that “final decision” means what it says. Thus, the time period did not run from notification of the decision (which might be considered the “final action”) but rather from the date of the Memorandum. Moreover, because the Secretary’s decision was made public in advance, because the Secretary’s position that February 6 was the operative date was set forth clearly in its filings with the IBLA, and because there was more than sufficient time after receiving notification for the energy companies to prepare their appeal, the Court held that the limitations period was not equitably tolled.

While the two concurring opinions differ only with respect to whether the “final decision” by the Secretary was also the final “agency action” under the APA, the dissent takes the position that the operative date was February 12 letters because the APA creates the cause of action and in terms of accrual of claims, the APA speaks of final “action” not “decision.” As the dissent argues, the final “action” occurred when the Utah State Director acted on the February 6 Memorandum by notifying the energy companies that the leases were being withdrawn, the claim therefore did not arise until then, and the limitations period simply could not have begun to run until that date. While the dissent makes a compelling argument in the face of what appears to be clear language in the MLA, in the end the argument was unrewarding for the plaintiffs.

According to the plurality opinion, the energy company’s “gamble [with the limitations period] did not pay off” and whether one thinks that the plurality or the dissenting view here is the legally correct one, it is hard to argue against that point.

[1] Limitations periods such as the one at issue here are, in actuality, limited waivers of sovereign immunity. That is, upon the expiration of the limitations period, sovereign immunity protects the defendants from liability.